New Jersey Supreme Court Rules on Significant Unemployment Insurance Eligibility Question

In the course of the employer counseling work that I do in my labor and employment practice, clients ask a lot of questions regarding New Jersey’s Unemployment Compensation Law, especially about the grounds that are available to an employer to challenge employee eligibility for unemployment benefits.

One of the most common grounds for employer challenges is that the employer voluntarily left his/her employment without good cause for doing so. The New Jersey Supreme Court issued an interesting decision in McClain v. Bd. of Review, 2019 N.J. LEXIS 538 (2019) regarding that question which presented a novel twist: what happens to eligibility when an employee resigns his/her former employment to take a new job, but that job opportunity is thereafter lost through no fault of the resigning employee?

The New Jersey Supreme Court took up the foregoing issue because two different appellate panels when faced with that question reached divergent conclusions.  In the McClain case, the appeals panel held that there was no disqualification of benefits because the job offer that was presented to McClain that prompted her resignation was rescinded through no fault of McClain.  In the second case, Blake v. Bd. of Review, another appeals panel ruled to the contrary, declaring that, to be eligible for unemployment benefits, the employee had to actually begin working for the new employer before losing the job.  Since that did not happen because the job in that case was also rescinded pre-employment commencement, there was no eligibility for benefits.

In finding that McClain and Blake was eligible for benefits, the New Jersey Supreme Court focused on a part of the unemployment compensation law that made employees eligible for benefits where the employee worked for a substantial period of time with one employer and then left for an equal or better opportunity with another employer but was later terminated shortly after starting that employment.  While noting that both appeals panels presented plausible interpretations of the foregoing part of the unemployment compensation law, the Court ultimately viewed the McClain’s panel’s decision as more appropriate because it was in line with the remedial purposes of the law, which required a liberal analysis in favor of benefit eligibility. That decision was likewise more consistent with the reason for including the foregoing provision in the unemployment compensation law, which namely was to allow for benefit eligibility where employment was lost due to no fault of the employee.

The McClain decision shows that, while not every employer challenge to an unemployment compensation petition will succeed, it nevertheless can be a worthwhile endeavor because the law includes a number of grounds where eligibility for benefits can be denied. That can work to the benefit of the former employer to ensure that wrongful credits for the payment are not taken against their employer unemployment compensation account rating.


Ralph R. Smith, 3rd is Co-Chair of the Employment and Labor Practice Group. He practices in employment litigation and preventative employment practices, including counseling employers on the creation of employment policies, non-compete and trade secret agreements, and training employers to avoid employment-related litigation. He represents both companies and individuals in related complex commercial litigation before federal states courts and administrative agencies in labor and employment cases including race, gender, age, national origin, disability and workplace harassment and discrimination matters, wage-and-hour disputes, restrictive covenants, grievances, arbitration, drug testing, and employment related contract issues.

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