This past week, the Superior Court of New Jersey Appellate Division reversed a series of decisions made by the state’s Department of Labor Division of Unemployment Insurance’s Tribunal and Board of Review. The appeals court’s decision represents a significant victory for fair treatment of workers who have been laid off yet continue to support themselves through part-time work.

The case involved Karen McKnight, who was represented by Alan H. Schorr. Ms. McKnight was a long-time full-time employee of Toys “R” Us; she also worked a part-time job at Wegman’s Market. After 21 years of employment at the toy retailer, Ms. McKnight was laid off in June of 2018. She continued working her part-time job and filed a claim for unemployment benefits. The Department of Labor initially correctly calculated her base pay from both her full-time and part-time jobs as instructed on the unemployment benefits claims forms and reporting her continued income from Wegman’s as required. Her partial benefit rate was calculated at $542 per week, less her actual earnings from the part-time job.

Unexpectedly, nearly a year later Ms. McKnight received notification from the state that the amount of money that she was owed for unemployment compensation had been recalculated, subtracting her income from Wegman’s in the calculation of her base pay and reducing her weekly benefit rate to $304 and her partial benefit rate to $364. This recalculation was accompanied by notification that she owed the state back $6,099 for the determined overpayment for the past 11 months. Ms. McKnight hired Schorr & Associates, who appealed the redetermination, and her case was heard by the Appeal Tribunal in November of 2019. In the meantime, the Department of Labor had already seized her tax refunds to satisfy the improper refund demand.

During that hearing, Ms. McKnight noted that there were a few weeks when she had underreported her Wegmans earnings, but that those mistakes had only led to an overpayment totaling $342, which she had already repaid. Despite that assertion and her appeal, the Tribunal determined that she should never have been considered unemployed, that she was ineligible to receive benefits for the weeks encompassed within her mistake, and that she still owed the $342 for those weeks. Ms. McKnight appealed again In March of 2020, asking them to look at both the $342 issue and the recalculation that had not included her compensation from her part-time job in her base pay calculation.

This time, her case was reviewed by the Department of Labor’s Board of Review, which simply returned the case to the Tribunal, which reheard her case. In July of 2020, the Tribunal again decided that she owed back $342 for the few weeks when she had initially underreported her income.

Remarkably, this argument went back and forth again, when Ms. McKnight again asked the Board of Review to reverse the Tribunal’s decision regarding both issues, and the Board again returned the case to the Tribunal. In January of 2021 the Tribunal refused to consider her part-time wages as part of her base compensation and insisted that she owed the state back the monies she had received. In March of 2021 she appealed this decision to the Board a third time, and in June of that year the Board rejected her arguments and concluded that she had never been unemployed, had not been entitled to benefits, and was liable to return over $6,200 to the state. Both her federal and state tax refunds were applied to this debt, with a total of $6,884 taken from her tax refunds. This amounted to $607 more than even the Department of Labor had calculated that she owed.

In July of 2021, Ms. McKnight took her case to the Superior Court of New Jersey Appellate Division, represented by Allan H. Schorr. The appeals court allowed the Board of Review time to clarify its decision regarding the case, but even tin August of 2022 the Board confirmed its original opinion and decision.

In the appeal of the Board’s position, Mr. Schorr noted several key points, including:

• The unemployment compensation statute is supposed to be interpreted liberally in favor of providing benefits to those who have lost a job
• The unemployment compensation law is supposed to reward employees for working part-time jobs rather than punishing them
• Ms. McKnight’s original calculation of benefits was correct
• The Division of Labor had erred in its reconsideration and denial of including Wegman’s income in her base pay calculation

Mr. Schorr argued both that the Division of Labor had been mistaken in its position regarding the calculation of her benefits and in having determined that she was ineligible for unemployment benefits. He also noted that the Board had confused eligibility with chargeability and said that their error had resulted in the “erroneous, arbitrary, and capricious decision” regarding the benefits to which she was entitled.

In its review of the case, the appeals court noted that it is not generally in the position of substituting its own judgment for the administrative agency involved unless there is a clear showing that the agency’s decision lacks fair support or was “erroneous, arbitrary, and capricious.” They also pointed out that the burden of showing that rested with Ms. McKnight, then went on to review the facts of the case. In the end, they agreed with the points made by Mr. Schorr, noting the remedial purpose of the unemployment compensation law and clear language regarding the correct calculation and determination of benefits that Ms. McKnight had originally followed, and that the Division had paid for 11 months. The court confirmed the amount that she should have been paid, reversed the agency’s decision, and ordered them to properly recalculate her benefits and pay her back the monies that she was owed.

This important published Appellate victory continues a long string of important published Appellate and Supreme Court victories by Alan H. Schorr as both a litigant and as an amicus of the Court against the New Jersey Department of Labor. These victories have greatly improved the legal landscape for unemployed workers.