A tale of two stories

published in Oklahoma Employment Law Letter | August 1, 2011

By Michael Lauderdale

Sometimes unemployment claims receive only passing attention from employers or HR professionals. It is important to keep in mind that how you respond to unemployment claims can have consequences in later litigation.

Why isn’t he working?

Philip Estrada was hired by Hodge Warehouse to unload freight at its Okmulgee facility. Once the freight was unloaded, he separated it for delivery to other destinations. After 18 months on the job, he tripped, fell, and injured his ankle. He made several trips to the doctor but couldn’t obtain a release to return to work. He eventually retained an attorney and filed a workers’ compensation claim. Surgery was performed, and he returned to work nine months after the injury.

According to Estrada, when he was released from medical care, and tried to resume his employment with Hodge, it told him it no longer had any work for him, so he filed for unemployment benefits. In response to the unemployment claim, Hodge stated that Estrada wasn’t discharged but, rather, was replaced. It then reported to the Oklahoma Employment Security Commission (OESC) that it didn’t have any work for him. Estrada hired a lawyer and filed a lawsuit alleging retaliatory discharge. At trial, Hodge’s story changed again, with the employer claiming that Estrada had abandoned his employment.

Courts’ decisions

Estrada testified that he suffered mental anguish because he felt like a “loser,” which made him feel “sad.” Further, he claimed he was “bothered” because he was unable to provide for his family. His ex-wife also testified that he was “very upset.” There were no medical records presented, and Estrada never sought any mental health counseling or treatment. Additionally, he was out of work for only a month. Nevertheless, the jury awarded him $76,730 plus $18,387 in punitive damages, and Hodge appealed to the Oklahoma Supreme Court.

The Oklahoma Supreme Court threw out the punitive damages award but left the $76,730 judgment, the majority of which was for mental anguish. Even though Estrada was out of work for less than a month after recovering from his injury and before finding other employment, the court upheld the award, noting Hodge’s inconsistent reasons for Estrada’s separation from employment and that he was entitled to damages for “mental anguish” in addition to lost compensation. With attorneys’ fees, the employer likely will have to pay more than $150,000. Estrada v. Port City Properties, Inc., 2011 OK 30.

Lessons learned

The Oklahoma Supreme Court’s decision in this case provides several good lessons for employers. First, you must be extremely careful when responding to claims for unemployment compensation. When a former employee files for unemployment benefits, you often are required to provide a written description of the reasons and circumstances for the employee’s discharge. Additionally, in the course of investigating a claim for unemployment, the OESC may contact the company or a supervisor for additional information.

Further, the OESC may determine that a telephone hearing is necessary. When that happens, HR personnel and supervisors must explain the reasons the employee is no longer working. Through these processes, the OESC creates a file documenting the employer’s explanation. Sometimes, the explanation – whether it comes from HR, a supervisor, or a third-party service retained to handle unemployment claims – can include contradictory information or explanations.

In this case, the employer’s inconsistent reasons for the employee’s discharge hurt its case. The employer told the jury that he abandoned his job but told the OESC that it had no work for him when he was ready to return.

Accordingly, you must take care to properly respond to claims for unemployment benefits, particularly if you anticipate litigation from a terminated employee who happens to be in a protected class. In this case, the employee was protected because he had filed a workers’ comp claim. It’s important to remember that any information you provide (orally or in writing) may be used in a later proceeding. The best course of action is to forward any requests for information to HR or to a person designated to respond to unemployment claims.

The second lesson involves the danger of discharging an employee who is in a protected class. That’s especially true in the case of an employee who recently has suffered an on-the-job injury or filed a workers’ comp claim. Before terminating the employee, make absolutely certain you have legitimate nondiscriminatory reasons for doing so and that those reasons can be backed up by documents and witnesses.