The Pennsylvania Supreme Court issued a recent ruling that affects the ability of all Pennsylvania employers to deny unemployment compensation benefits to employees terminated for illegal-off-duty conduct. The ruling came in Burger v. Unemployment Compensation Board of Review, which was issued in late July 2002.

The Burger case involved a nursing home-employer which discovered evidence that one of its certified nurses' aids regularly used marijuana and illegal prescription medications. When confronted, the employee denied illegally using prescription medications but admitted using marijuana every evening. The employee further explained that she never reported to work directly after using marijuana, thereby implying that her drug use never affected her work performance or endangered patients. That explanation notwithstanding, the employee was terminated for illegal drug use.

The employee subsequently applied for unemployment benefits, which the Office of Employment Security (OES) denied pursuant to section 402(e) of the Unemployment Compensation Law (UCL). The OES denial was affirmed by a hearing referee. Section 402(e) denies compensation benefits in circumstances where termination was due to willful misconduct in connection with work. The employee appealed the denial of benefits initially to the Unemployment Compensation Review Board (UCRB) and subsequently to the Commonwealth Court, arguing that section 402(e) was inapplicable because it did not govern conduct away from work. In essence, the employee argued that given the fact that her "misconduct" occurred off-duty, she was nonetheless entitled to benefits. Both the UCRB and the Commonwealth Court upheld the denial on the basis that the employee's conduct constituted willful misconduct connected to her employment.

The employee's final avenue of appeal was to the Pennsylvania Supreme Court, which reversed the denial of benefits. The Supreme Court explained that while the employer was clearly justified, and, indeed, acted responsibly in terminating the employee for drug use, the question at issue was whether the employee was eligible for unemployment benefits, not whether her termination was justified. The court noted that off-duty misconduct does not constitute section 402(e) willful misconduct in connection with work unless it extends to job performance and thus becomes work related. The court stated that section 402(e) would have applied if the employee appeared at work under the influence of marijuana, but there was no evidence that she had done so. Accordingly, the court found that the employee could not be denied benefits under section 402(e) for off-duty illegal drug use.

Though the court ruled that benefits could not be denied under section 402(e), it suggested that benefits could have been denied under section 3 of the UCL, which, as a matter of public policy, permits the denial of benefits for non-work-related misconduct. Specifically, the court noted that section 3 permits employers to disqualify an employee from benefits coverage for non-work-related misconduct which is inconsistent with acceptable behavioral standards and directly affects the employee's ability to perform her assigned duties. While the court suggested that section 3 would preclude benefits under the circumstances of off-duty illegal drug use, it nonetheless found that the employee was entitled to benefits because neither the employer nor OES raised section 3 as a basis for denying unemployment compensation benefits before the hearing referee. Consequently, the court determined that the employer's failure to raise the section 3 issue before the hearing referee resulted in the issue being waived on appeal.

On its face, the Burger case appears to inhibit the ability of employers to properly discharge employees for illegal drug use without triggering unemployment compensation benefits. However, this inhibition is largely illusory. The Burger case simply puts employers on notice that a distinction must be drawn between work-related and non-work-related off-duty employee misconduct, if the employer seeks to deny unemployment compensation benefits. For benefit denial purposes, the distinction between these two classifications are very significant: benefits may be denied under section 402(e) for off-duty work-related misconduct, while benefits may be denied under section 3 for off-duty non-work-related misconduct. Whenever an employer terminates an employee for off-duty misconduct and seeks to deny unemployment compensation benefits to the terminated employee, the employer should raise both section 3 and section 402(e) as alternative bases for denying unemployment compensation benefits before the OES and hearing referee, and present arguments for both on the record for any subsequent appeal. Employers who fail to plan and defend their termination decisions in this manner run the risk of an outcome substantially similar to that in the Burger case: providing unemployment compensation benefits to a clearly undeserving employee because basic substantive and procedural legal hurdles were not cleared.