Employment Representation by Non-Attorneys in Unemployment Compensation Proceedings

Historically, the American courts have jealously guarded the domain of the lawyer, preventing non-lawyers from providing legal advice, preparing legal documents and appearing in court on behalf of clients, all by disciplining such conduct as the “unauthorized practice of law.” The cynic may suppose that the courts who enforce prohibitions on the unauthorized practice of law are comprised of lawyers merely looking out for their own, but the reality is more complicated.  As noted by Justice Stern in the 1937 Pennsylvania Supreme Court case of Shortz, et al. v. Farrell,

“While in order to acquire the education necessary to gain admission to the bar and thereby become eligible to practice law, one is obliged to ‘scorn delights, and live laborious days,’ the object of the legislation for bidding practice to laymen is not to secure to lawyers a monopoly, however deserved, but, by preventing the intrusion of inexpert and unlearned persons in the practice of law, to assure to the public adequate protection in the pursuit of justice, than which society knows no loftier aim.”

But in April of 2007, the Pennsylvania Supreme Court carved out an exception that will be both controversial in the legal community and noteworthy in the business community.  Specifically, in the case of Harkness v. Unemployment Compensation Board of Review, appeal of Macy’s East, Intervenor, the Pennsylvania Supreme Court addressed the question of whether an employer can be represented at an Unemployment Compensation hearing by an individual who is not an attorney.  In Harkness, the Pennsylvania Commonwealth Court concluded that it had been error for an Unemployment Compensation referee to permit Macy’s, the employer, to be represented at an Unemployment Compensation hearing by a non-attorney “tax consultant” that was in the business of representing companies in Unemployment Compensation matters. Based upon this finding of error, the Commonwealth Court vacated the referee’s denial of unemployment compensation benefits to an employee, and directed that the referee hold a new hearing, effectively giving the employee a second shot at winning benefits. 

In Harkness, the Pennsylvania Supreme Court reversed the decision of the Pennsylvania Commonwealth Court, holding that representation of an employer in proceedings before an Unemployment Compensation referee does not constitute the practice of law. The court acknowledged that the paramount inquiry in the question of what constitutes the practice of law is a consideration of the public interest. The court reasoned, however, that “while the public interest is certainly served by the protection of the public, it is also achieved by not burdening the public by too broad a definition of the practice of law, resulting in the overregulation of the public’s affairs.” 

Chief Justice Cappy, speaking for the Court, wrote that “the activities performed by an employer representative in an Unemployment Compensation proceeding are largely routine and primarily focus upon creating a factual basis on which a referee will award or deny Unemployment Compensation benefits. As a general proposition, providers of services such as the management of payroll, tax, and employee benefit operations will also attend Unemployment Compensation proceedings to provide appropriate personnel records and other documents and assist in the fact-finding process so as to aid the referee in his or her determination.  These individuals are more akin to facilitators rather than legal practitioners.  The purpose of their presence is not to engage in the analysis of complex and intricate legal problems, but rather as an adjunct to the employer (or claimant) in offering their respective viewpoints concerning the events at issue.”

In the end, the court concluded that requiring employers to be represented by counsel at Unemployment Compensation proceedings “will not only undermine the informal, speedy and low cost nature of these proceedings, it may dissuade many employers from defending claims for benefits leading to the possibility of an unwarranted drain on the system.” Thus, due to the informal nature of the proceedings, the minimal amounts usually at issue in Unemployment Compensation cases and the relatively finite nature of the legal issues, the Pennsylvania Supreme Court concluded that representation of an employer at an Unemployment Compensation hearing does not constitute the unauthorized practice of law.  The Court was quick to distinguish, however, Workers’ Compensation proceedings from Unemployment Compensation proceedings, noting the “formality and complexity of Workers’ Compensation proceedings,” which “include pretrial investigation and discovery, the filings of pleadings, testimony by experts, and the potentiality of significant benefit amounts at issue.”

In the end, the Supreme Court’s Decision in Harkness turns on (1) the rather tenuous distinction between a lawyer and a “facilitator” hired by the employer “to aid the referee in his or her determination,” and (2) the proposition that Unemployment Compensation proceedings are informal and uncomplicated. Whether or not one agrees with the Supreme Court’s reasoning, the rule is now clear: An employer may hire a non-lawyer to represent the employer’s interests in Unemployment Compensation proceedings. 

However, the fact that an employer can use the services of a non-lawyer in Unemployment Compensation proceedings does not mean that the employer should go into Unemployment Compensation hearings without an attorney.  While it is certainly the case that the legal issues arising in an Unemployment Compensation proceeding are significantly less complex than the issues arising in many Workers’ Compensation proceedings, it is folly to suppose that Unemployment Compensation hearings do not present evidentiary issues beyond the expertise of the lay employer or its tax consultant. Your humble author has been present during numerous Unemployment Compensation hearings where employers not represented by lawyers have tripped and stumbled over the intricacies of the Hearsay Rule and other evidentiary obstacles, thereby losing cases they might have won if not for their inability to navigate the Rules of Evidence.

Thus, in the wake of Harkness v. Unemployment Compensation Board of Review, we have the clash of two rules. First is the rule of the Harkness case itself: a non-lawyer can lawfully represent an employer in Unemployment Compensation proceedings. Second, we have the rule of common sense: you get what you pay for. 

 

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