By Danielle J. Lewis, Esq.

In Kentucky, as in most states, the general rule is that a corporate party may not represent itself in a legal proceeding without an attorney. Individuals can always represent themselves pro se (without a lawyer), but corporate entities – including partnerships, corporations, and limited liability companies – cannot. Until recently, there was one exception to this rule. KRS 341.470(3)(a) authorizes “any employer” to represent himself in a proceeding before a referee or the Unemployment Commission. The same statute specifically provides that a “managerial representative” may represent a corporate or partnership employer in a proceeding before a referee or the Unemployment Commission. KRS 341.470(3)(b).

However, the Kentucky Court of Appeals recently held that statute to be unconstitutional because it violates the separation of powers provisions of the Kentucky Constitution. Nichols v. Kentucky Unemployment Commission, et al, Case No. 17-CA-001156 (Ky. App. Apr. 26, 2019). Per this decision, all employers (other than individuals) must now be represented by attorneys in unemployment hearings before a referee or the Unemployment Commission.

By way of background, Michael Nichols worked for Norton Healthcare as a clinical engineering specialist from 2013 until 2015. Nichols was fired on November 9, 2015 for failure to follow instructions, falsification of records, and misfeasance of company resources. He immediately applied for unemployment benefits, citing “lack of work” as the reason for his termination by Norton. Norton contested Nichols’ application, stating that it had discharged Nichols for misconduct (which would disqualify him from receiving unemployment benefits).

After the Kentucky Unemployment Insurance Commission (“the Commission”) completed an initial investigation, it determined that Nichols had been terminated for cause and that he had misrepresented the reasons for his termination in his application for unemployment benefits. Both findings disqualified Nichols from receiving unemployment benefits. Nichols appealed this decision to a referee, who conducted evidentiary hearings in February 2016. During these hearings, Nichols was represented by an attorney and Norton was represented by a managerial employee (Nichols’ former supervisor, who had terminated him). Although the referee did most of the questioning, the managerial employee was allowed to cross-examine Nichols. The manager also testified as a fact witness on behalf of Norton.

The referee upheld the initial decision, finding that Nichols was not entitled to any unemployment benefits. That decision was later upheld by the entire Commission and the Jefferson Circuit Court, after Nichols appealed. Nichols then sought review by the Kentucky Court of Appeals.

The Court of Appeals did not reach Nichols’ arguments that the findings against him were flawed on the merits, because it agreed with Nichols that Norton should not have been allowed to represent itself – via Nichols’ former manager – before the referee and the Commission. Specifically, the Court of Appeals found that KRS 341.470(3)(b) was unconstitutional because, per the Kentucky Constitution, only the judiciary has the power to establish rules relating to the practice of law. The Court explicitly stated that its finding would not be retroactive, but it would apply in Nichols’ case. Thus, the entire case was remanded for a new administrative hearing before the Commission, during which Norton would have to be represented by counsel.

In his dissent, Justice Henry agreed with the majority holding that KRS 341.470 was unconstitutional and that employers needed to be represented by attorneys in matters before the Unemployment Commission. However, he disagreed with the majority’s decision to apply the holding to Nichols’ case, noting that it was a waste of time and judicial resources to remand a case that appeared to have been soundly decided on the merits before the statute had been declared unconstitutional.

This decision will significantly impact corporate employers in Kentucky going forward, in that it requires them to employ licensed attorneys to represent them in unemployment hearings. As the Nichols decision demonstrates, failure to have a licensed attorney representing the employer may result in reversal of a decision in favor of the employer even when the decision was otherwise sound and based on valid evidence. This would result in additional time and expense defending the claims in a second hearing, even though it would be unlikely to change the ultimate outcome.

If you have any questions about this decision or about defending employment claims in court or administrative hearings, please call one of our Employment Practices Defense Group members.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.

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