Week Ending 2/17/17: Y.A.L.E. School Southeast II v. Board of Review

Schorr & Associates’ Employment Case of The Week ending February 17, 2017

Y.A.L.E. Sch. Southeast III, Inc. v. Bd. of Review,  N.J. Super. Unpub. LEXIS 384 (App. Div. February 17, 2017)

What is the “Residuum Rule” and what does it have to with unemployment law?  Read on - it turns out to be a very important rule for unemployment claimants at Appeal Tribunal hearings.

This case involved a finding of simple misconduct, which carries with it a maximum penalty of an eight week delay of payment.  This case is one of those rare Appellate Division appeals where the employer feels so strongly about their ex-employee collecting eight week of benefits on time that they hire an expensive law firm to challenge the Department of Labor.  In this case, it did not turn out so well for the employer.

Mark Manchio was a teacher’s aide at the YALE school, which is a school for disabled children.  He was initially partially disqualified based upon evidence produced by the employer of two previous write-ups and a final incident in which Mr. Manchio allegedly left a classroom while a student was having a “behavioral crisis”.  Mr. Manchio returned to the classroom where he allegedly apologized to a co-worker by laughingly stating, “I’m sorry” and then mumbling “an expletive” under his breath.

Manchio appealed to the Appeal Tribunal.  The employer did not show up for the Appeal Tribunal and did not submit any evidence to the Appeal Tribunal. Manchio testified that the student was acting up “a little bit”,  admitted chuckling, and denied ever using profanity or cursing at the co-worker.  Hearing testimony and evidence only from Mr. Manchio, the Appeal Tribunal ruled in favor of the Claimant and reversed the simple misconduct.  The Board of Review affirmed, and the employer appealed to the Appellate Division.  The employer argued on appeal that the notice of the hearing was defective and that, in any event, the Appeal Tribunal should have relied upon the hearsay evidence and testimony given to the fact-finding deputy.

The Appellate Division affirmed.   The Appellate Division rejected the employer’s first argument that the Appeal Tribunal should have considered the evidence before the deputy fact-finder.  Unemployment fact-findings are de novo hearings, meaning that the entire hearing proceeds as if there were never an initial determination, other than the finding itself.  The Appellate Division stated that it could find no authority to support an argument that an Appeal Tribunal should rely upon evidence produced to the Deputy.  The Appellate Division also rejected the employer’s argument that, even given the Claimant’s own testimony, it constituted misconduct.  Citing our Silver v. Board of Review case, the Appellate Division rejected that contention.

Finally, the employer argued that even though its written reports were hearsay, the Appeal Tribunal should have considered the reports because the administrative hearings are permitted to consider hearsay.  Here is where the “Residuum Rule” comes in.   Although hearsay may be admissible in administrative hearing, there still must be a “residuum” of legal and competent evidence to support it.  The only dictionary definition of “residuum” that I could find relates to chemical residue, but apparently the New York Court of Appeals utilized the term in 1916 in Carroll v. Knickerbocker Ice Co., 218 N.Y. 435 (1916) regarding hearsay evidence in worker's compensation hearings.   The rule has been in common use (43 cases that I found) in New Jersey Courts since 1972.

The importance of the residuum rule in unemployment law is that an employer cannot just show up with a third party administrator and no fact witnesses and prevail, even with excellent hearsay evidence.  There still must be basis in the “residuum” of competent evidence to constitute sufficient evidence.  Bottom line - no fact witness, no finding of misconduct against the employee.  Although most Appeal Tribunal examiners actually follow this rule, it is a good idea to keep this case around to provide a chemistry lesson where necessary.  This rule, however, applies to all administrative hearings and provides important protection against parties seeking to prove their entire case by hearsay.

Appellate Judges: Lihotz and O’Connor.

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