Unemployment Compensation • Willful Misconduct • Good Cause

Matthews v. Unemployment Comp., PICS Case No. 14-0389 (Pa. Commw. March 5, 2014) Brobson, J. (14 pages).

The Unemployment Compensation Review Board properly reversed a referee’s decision granting claimant unemployment compensation, finding that claimant was guilty of willful misconduct and did not show good cause when she illegally avoided taxes while running employer’s business. Affirmed.

Employer bought a day spa business from claimant and kept her employed as manager. When employer discovered there were unpaid bills, he asked to see the books and records. Claimant produced two sets of books: one labeled “real” and the other labeled “not real.” Employer fired claimant after discovering that claimant had been paying employees with cash in order to save money on payroll taxes, keeping two sets of books, failing to pay vendors, consistently arriving to work late, and refusing to use business accounting software.

The board determined that claimant was ineligible for unemployment compensation benefits based on her willful misconduct of deliberately hiding cash wages from the various taxing authorities. Claimant petitioned the court for review and argued that the board’s findings of fact were inconsistent and that she had good cause for her actions. She claimed that employer condoned her actions by directing her to run the business in the same manner she had before employer purchased it.

The court found no inconsistencies in the board’s finding that employer was unaware that the reason for paying employees with cash was to underreport wages to taxing authorities. The board was the ultimate fact finder and made its own determination as to witness credibility and weight of evidence. The court agreed with the board that deliberately hiding wages to lower tax payments constituted willful misconduct and that employer had a right to expect claimant to run the business lawfully.