Alan Schorr’s Employment Case of The Week ending March 21, 2014

Gaul v. Board of Review, 2014 N.J. Super. Unpub. LEXIS 559 (App.Div. Mar. 17, 2014)

A pro se appellant scored a rare unemployment victory this week. In doing so, Sandra Gaul also established new public policy that can be used to support CEPA and Pierce claims.

Sandra Gaul worked as a commercial insurance placer for Rue Insurance for almost thirty years. In 1987, Rue required its employees to sign a non-compete and confidentiality agreement, and Ms. Rue signed the agreement. In July 2008, Rue announced that all employees must sign a new agreement.

Ms. Gaul had reservations about the new agreement, primarily because the new agreement would prohibit her from disclosing information about the company to “any person”, and the agreement defined “person” to include, among other things, any “government (or any branch, subdivision or agency thereof), governmental administrative or regulatory authority.”

By the end of September, Ms. Gaul was still refusing the sign the agreement, complaining that defining “person” to include “government” violated her civil rights. She was concerned because she had contacted the Division on Civil Rights in May 2008 after overhearing a conversation between the owners discussing several illnesses and disabilities that Ms. Gaul suffered from. Ms. Gaul agreed to sign the agreement if the government prohibition was removed. Rue refused to remove the provision, but offered her a letter agreeing to keep her employed until May 31, 2009, which was her intended retirement, if she signed the agreement. She again refused to sign the agreement and was terminated four days later.

The unemployment appeal process was a complete mess. She was originally granted benefits, but four months later the appeal tribunal reversed, finding that she had voluntarily left work without good cause. She appealed to the Board of Review, which affirmed. She then filed this appeal in May 2009. A year and a half later the Appellate Division remanded to the appeal tribunal for additional testimony. Four more months later, on August 30, 2011, a second appeal hearing was convened. The employer, Richard Rue, refused to participate “on the advice of counsel”. Even without the employer’s testimony, Ms. Gaul was again disqualified, with the appeal tribunal holding that by Ms. Gaul’s own testimony she would have continued working had she signed the agreement, and therefore her refusal to sign the agreement constituted a voluntary quit.

Ms. Gaul then appealed the decision to the Board of Review, which then took seven more months to rubber-stamp the appeal tribunal decision. Ms. Gaul then appealed again. Two and a half more years later, the Appellate Division finally rendered a decision. Let me digress here for a moment to rant about how absolutely disgraceful it is that an unemployment appeal should take almost six years to process. Our unemployed workers are our most vulnerable citizens. Unemployment compensation is not only a safety net which needs to be promptly paid when the employee needs the safety net, but it is a benefit for which an employee pays a weekly insurance premium. Ms. Gaul paid her premiums every week for 30 years. There is something drastically abusive and unconstitutional about a badly flawed appeal process that takes six years to process an unemployment claim.

To Ms. Gaul’s credit, she stuck with it and the Appellate Division rewarded her with a full reversal. The Court surprisingly first turned to the Conscientious Employee Protection Act (CEPA). Without resolving whether the employer intended to prevent employees from reporting unlawful actions to the government (because the employer refused to testify), the panel found that Ms. Gaul reasonably interpreted the language in that manner, and the panel could not state that her view was unreasonable. The Appellate Division held that the provision was void and against public policy. Accordingly, the Appellate Division found that Ms. Gaul was within her rights not to sign the agreement.

But that is not why the Appellate Division reversed. After all that analysis, the Appellate Division held that Ms. Gaul did not voluntarily quit, but rather was terminated because she refused to sign the agreement. She did not intend to resign.

This decision is important for several reasons. First, there are few decisions holding non-compete and confidentiality agreement to violate public policy. In a published Law Division case, Ackerman v. The Money Store, 321 N.J. Super. 308 (Law Div. 1998), the Court granted summary judgment in favor of a plaintiff who established that she was terminated because she refused to sign a mandatory arbitration agreement that would have taken away her right to file a lawsuit or administrative claim against her employer. But, in Maw v. Advanced Clinical Communs., Inc., 179 N.J. 439 (2004), a case in which this writer appeared and argued as amicus, the Supreme Court held that it did not violate public policy for an employer to force a clerical worker to sign a very broad non-compete agreement. This case provides the case that purely interpreted a confidentiality agreement and found it to violate public policy.

For unemployment law purposes, this case is important for two reasons. First, we have consistently argued that employees who refuse to sign agreements for whatever reasons should not be terminated. Regardless of the reasonableness of the agreement, if an employer insists that an employee sign an agreement in order to remain employed and then terminates the employer for refusing to sign, it cannot rationally be termed as a “voluntary quit”. In such a case it is the employer that initiates the change in the employment conditions, and if the employee unreasonably refuses to sign the agreement, then the employee is terminated, and the analysis should then become whether the employer should be disqualified for insubordinate misconduct, not whether the employee left work voluntarily. There is nothing voluntary in these situations when it is the employee’s intention and desire to work, so such disqualifications, which are all too common, are wrong, and this case says so.

In addition, the panel in this case held that the standard that should be used in determining whether an employee should be disqualified for refusing to sign an agreement is whether the employee “reasonably believed” that the agreement violates law or public policy, not whether the agreement actually violates public policy. Several CEPA cases hold that an employee’s belief is only reasonable if it is correct, and this case helps the counter-arguments both from a CEPA standpoint and from an unemployment standpoint.

Ms. Gaul disclosed in her unemployment hearing that she remained working despite suffering from breast cancer and diabetes, and that she had a heart attack. Despite all of those ailments, she persevered throughout our impossibly difficult legal system and scored an important victory. It is not clear as to whether Ms. Gaul ever made a legal claim against Rue, but, based upon the employer not participating in the appeal tribunal “upon advice of counsel”, it is quite possible that there were other things going on. In any event, Ms. Gaul, we salute you for your tenacity and wish you a happy and healthy retirement.

Appellant/Claimant: Sandra A. Gaul.

Respondent Board of Review: John J. Hoffman, Acting Attorney General, Lisa A. Puglisi, AAG, Robert M. Strang, DAG.

Appellate Panel: Judges Sapp-Peterson and Hoffman.