State Supreme Court Deals Blow to UI System, Employers

In a unanimous opinion that is nothing short of astonishing, the Washington Supreme Court this morning bluntly erased a thoroughly negotiated, battleground tested, foundational component of our state's Unemployment Insurance system -- its statutory provisions governing "voluntary quits".

The court held that the law didn't say what the Legislature, the Employment Security Department, the business community, and I'd say a vast swath of the labor community, have since 2003 understood it to say.   That is, a negotiated list of ten "good cause" reasons for leaving work voluntarily  while still maintaining eligibility for UI benefits is an exclusive list of reasons for voluntary quits.

Voluntary quits are an issue in unemployment insurance because the historical purpose of the system is to provide a social safety net with partial wage replacement for a temporary period that an individual is unemployed through no fault of his or her own, and is able, willing, and looking for work.  Allowing benefits for individuals who choose to quit work runs afoul of that purpose. 

But in a landmark 2003 compromise bill, the Legislature specified ten (and in 2008 added an 11th) clear reasons why a voluntary quit may still result in benefit eligibility.  Things like relocation of a military spouse, protection of family from domestic violence, certain substantial reductions in pay or hours, and so on.  This was the other half of legislation that fundamentally altered the collection of UI taxes from employers and addressed other benefit costs.  It was part of a business-labor compromise brokered by then Gov. Gary Locke and set against the backdrop of serious economic competitiveness concerns and the state's efforts to win assembly of Boeing's new commercial airliner.

AWB attempted to impress this point upon the court through an amicus curiae ("friend of the court") brief supporting the Employment Security Department.  But the court stated:

Amicus Association of Washington Business contends that the statutory list was intended to be exclusive and that exclusivity was "the finishing stroke of a multi-year public policy compromise between business and labor over the nature of the Unemployment Insurance system . . . and the eligibility for unemployment benefits for persons who voluntarily leave their job[s]." This may well be true.  Unfortunately, we have not been presented with compelling evidence of this underlying legislative purpose by either of the parties. 

Instead, we discern no clear intent from the legislative history. 

We thought the statute spoke for itself, but the court found it "awkward" and "ambiguous".  So the court swept aside the statutory list, but opened Pandora's box: individualized assessments of a claimant's "compelling personal reasons" for voluntarily leaving work regardless of the statutory reasons. 

This will likely be an administrative nightmare for the Employment Security Department both going forward and, potentially, having to reassess benefit claims since 2003 that were turned down because the voluntary quit did not fall within one of the ten reasons.   

And this indefinitely expansive new universe of potential voluntary quit benefits will result in heightened costs to employers facing a downward trending economy (yesterday's news: state unemployment now over 5%) and a system where Washington's job providers already pay the second highest UI taxes in the country.

The UI system has already become a hot topic for the 2009 Legislature because of a US Department of Labor determination that the Employment Security Department's tax collection system is out of conformity with federal law -- a problem the Legislature must fix.

Now, on the benefit side, today's decision elevates the voluntary quits issue to a similar prominence as the Department, stakeholders, and Legislature figure out whether, and how, to pick up the pieces.

(Cross-posted at the WashACE blog)