[link|http://www.chron.com/cs/CDA/story.hts/business/1518534|JC Penney story]

Aug. 2, 2002, 12:03AM

State ends effort to deny benefits to laid-off Penney workers


AUSTIN -- After taking extraordinary steps to deny unemployment benefits to employees when a Houston J.C. Penney store closed, the Texas Workforce Commission is calling it quits.

Commissioners unanimously voted this week to drop the state's appeal in a court fight pitting the commission against employees who lost jobs at Northwest Mall two years ago when Penney permanently shut its doors.

"I feel really good that we did challenge this one egregious ruling they made," said Austin labor attorney Rick Levy, who won the case in state district court for four of the former Penney employees.

The ruling is limited to those involved in this case. It does not help the 53 others who applied for unemployment after the store closed if they were rejected on similar grounds.

"Unfortunately, hundreds of cases are decided each year, and very few get taken to court," Levy said. "It's an employer-dominated agency, and workers still don't get a fair shake."

Commissioners Diane Rath, who represents the public, and Ron Lehman, who represents employers, vote as a bloc against the labor representative, T.P. O'Mahoney, Levy said.

Rath and Lehman overturned lower administrative findings at the agency when they sided with J.C. Penney's position that the workers had "voluntarily quit."

At issue was an employee questionnaire asking those about to be laid off if they had an interest in being considered for jobs at other J.C. Penney stores. They were warned they would lose their severance pay if they accepted a job at a Penney's store.

A separate memo from store manager Manny Salinas notified workers that their "scheduled last day of employment" would coincide with the day the store closed. It also noted that there were no positions open at other stores.

Rath and Lehman ruled the employees quit their jobs by refusing the opportunity to apply for a "transfer." That made them ineligible for unemployment compensation.

"It is nothing short of astonishing that the majority concluded that the claimant quit without good cause connected with the work," O'Mahoney wrote in his lone dissent.

"How could the claimant quit a job, when the job no longer existed at the time of her separation?" he continued. "What opportunity does the majority believe existed? Even if the claimant had agreed to try for a transfer, she was not guaranteed another job."

State District Judge James F. Clawson Jr. ruled in Houston last May in favor of the employees, concluding they were laid off and entitled to unemployment checks.

"In the context of a store closing," Levy had argued, "does providing a survey form with no job-specific job offer, no guarantee of employment, and no explanation as to the effect of the answers on the form convert a company initiated mass layoff into a voluntary resignation by an individual employee?"

J.C. Penney dropped its appeal, but the commission continued on its own.

The commission dropped its appeal after the Houston Chronicle asked Rath and Lehman why they were pursuing a case even the employer had agreed to drop.

Commissioners and J.C. Penney officials said their attorneys advised them not to discuss the matter until litigation has formally ended.

The Penney store closing resulted in 85 layoffs and 53 workers filing unemployment claims, according to the commission. However, it is impossible to know how many of the former workers were ultimately denied benefits by the commissioners because they checked the wrong box on the questionnaire.

Commission attorney Michael Burns refused to supply documents that would show how often the commissioners voted to deny benefits. He argued that federal law protecting the privacy of the company is an exception to the Texas Public Information Act.

The Texas Attorney General's office will review that decision.

Had the commission prevailed, Levy said it would have made it legal for companies to place all sorts of barriers in the path of laid-off workers, resulting in even more denials of claims during massive layoffs.

"The implications were huge," he said. "Particularly with the economic situation as it is, potentially thousands of workers were facing loss of additional benefits through this additional hoop set up by the Workforce Commission."

Already, Texas employers are far more likely to challenge unemployment claims and state officials are far more likely to side with employers than is true nationally, according to an Urban Institute study.

In 2001, for instance, 36 percent of all claims were contested, compared with less than 20 percent nationally. Benefits are denied in 70 percent of Texas cases where employers claim employees quit voluntarily and in 40 percent of cases where employers claim misconduct, Urban Institute economist Wayne Vroman said.