                IN THE COMMONWEALTH COURT OF PENNSYLVANIA


RIO Supply, Inc. of PA,                        :
                  Petitioner                   :
                                               :   No. 1939 C.D. 2014
              v.                               :
                                               :   Submitted: June 26, 2015
Unemployment Compensation                      :
Board of Review,                               :
                 Respondent                    :


BEFORE:       HONORABLE BONNIE BRIGANCE LEADBETTER, Judge
              HONORABLE RENÉE COHN JUBELIRER, Judge
              HONORABLE PATRICIA A. McCULLOUGH, Judge


OPINION BY
JUDGE McCULLOUGH                                            FILED: September 18, 2015


              RIO Supply, Inc. of PA (Employer) petitions for review of the
September 30, 2014 order of the Unemployment Compensation Board of Review
(Board) which reversed a referee’s determination and held that Jonathan Boston
(Claimant) was not ineligible for benefits pursuant to section 402(b) of the
Unemployment Compensation Law (Law).1
              Claimant worked for Employer from December 5, 2007, until his last
day of work on May 7, 2014. Claimant had been employed as a warehouse manager,
at a salary of $30.00 per hour, plus health benefits and travel compensation. In early
May 2014, a driver who worked for Employer decided to resign, and during an exit

       1
         Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.
§802(b). Section 402(b) of the Law provides that a claimant is ineligible for benefits for any week
“in which [his] unemployment is due to voluntarily leaving work without cause of a necessitous and
compelling nature. . . .” Id.
interview, the driver informed Employer that Claimant had told him he should resign.
Employer subsequently demoted Claimant from warehouse manager to driver,
thereby reducing his salary to $18.00 per hour and eliminating his health benefits and
travel compensation. Following his demotion, Claimant worked for Employer for
approximately two weeks. On May 12, 2014, Claimant formally resigned due to the
substantial change in his salary and benefits. (Board’s Findings of Fact Nos. 1-8.)
             Claimant applied for benefits with the local service center, which
concluded that Claimant was ineligible for benefits under section 402(b) of the Law.
Claimant appealed and a referee held a hearing on July 10, 2014. Claimant testified
that when he began his employment, Employer provided him a company car, medical
benefits, and reimbursement of all travel expenses. However, Claimant stated that
Employer later eliminated the medical benefits and replaced the company car with a
car allowance that was taxable to Claimant.            Claimant testified that Employer
subsequently eliminated the car allowance and reimbursement for travel expenses.
Claimant also stated that the elimination of these benefits was not based upon any
disciplinary reason. Claimant described his demotion and 40% reduction in salary as
the final element in his decision to resign.
             Joseph Overbeck, Employer’s president, testified that Claimant had
worked for approximately two weeks as a driver and that he and Claimant had no
discussions before Claimant resigned. Overbeck stated that Claimant’s demotion was
premised upon the statements of a resigning driver during an exit interview that
Claimant encouraged the driver to leave because “it wasn’t a good place to work.”
(Reproduced Record (R.R.) at 23a.)             Overbeck noted that, following this exit
interview, he suspended Claimant for two days before demoting him to the driver




                                               2
position. Overbeck reiterated that he and Claimant had no discussions after the
demotion.
             On cross-examination, Overbeck acknowledged that he advised
Claimant to stop fighting or disagreeing with him unless he wanted to work
someplace else and that Claimant could be replaced. Overbeck identified an undated
memo he sent to Claimant advising Claimant of the reasons for his demotion,
including Claimant’s unilateral moving of his office into Employer’s warehouse and
Claimant’s repeated statements that Employer was “not a great place to work.”
(Original Record, Service Center Exhibit 7.)
             The referee ultimately affirmed the decision of the local service center
that Claimant was ineligible for benefits under section 402(b) of the Law. The
referee explained that Claimant was demoted and never discussed his dissatisfaction
with Employer prior to resigning. Thus, the referee concluded that Claimant failed to
act in good faith in this case.
             Claimant appealed to the Board, which reversed the referee’s decision.
Citing Allegheny Valley School v. Unemployment Compensation Board of Review,
697 A.2d 243, 248 (Pa. 1997), the Board explained that “the logical focus for
determining whether necessitous and compelling reasons exist for a claimant to
voluntarily terminate his employment after receiving a demotion is the justification
for the demotion” and that “a claimant does not have necessary and compelling
reasons to voluntarily terminate his employment if the demotion was justified
because the change in job duties and remuneration was the result of the claimant’s
fault.”
             The Board concluded that Employer failed to present competent
evidence to establish that Claimant’s demotion was his own fault. The Board noted



                                          3
that Employer attempted to justify its demotion of Claimant based upon the
uncorroborated, hearsay testimony of an employee who was resigning. Relying on
Brunswick Hotel & Conference Center, LLC v. Unemployment Compensation Board
of Review, 906 A.2d 657 (Pa. Cmwlth. 2006), the Board further concluded that the
reduction in Claimant’s salary and the elimination of his health benefits and travel
expenses constituted necessitous and compelling reasons to quit his employment.
Finally, the Board stated that any reasonable efforts by Claimant to preserve his
employment would have been futile.
              On appeal to this Court,2 Employer argues that the Board erred in
concluding that Claimant was not ineligible for benefits under section 402(b) of the
Law. More specifically, Employer argues that the Board impermissibly shifted the
burden of proof to Employer to present competent evidence that Claimant’s demotion
was his own fault. We disagree.
              The mere fact that a claimant voluntarily terminates his employment
does not alone act as an absolute bar to receiving unemployment compensation
benefits. Allegheny Valley School, 697 A.2d at 246. In order to be entitled to
unemployment benefits, an employee who voluntarily terminates his employment
bears the burden of proving that he had cause of a necessitous and compelling
nature.3 Wert v. Unemployment Compensation Board of Review, 41 A.3d 937, 940

       2
          Our scope of review is limited to determining whether constitutional rights have been
violated, whether errors of law were committed, or whether findings of fact are supported by
substantial evidence. Shrum v. Unemployment Compensation Board of Review, 690 A.2d 796, 799
n.3 (Pa. Cmwlth. 1997).
       3
          Whether a claimant has necessitous and compelling cause to quit is a question of law
subject to appellate review. Taylor v. Unemployment Compensation Board of Review, 378 A.2d
829, 832 (Pa. 1977).




                                              4
(Pa. Cmwlth. 2012). Generally, necessitous and compelling cause exists when there
is real and substantial pressure to terminate one’s employment that would compel a
reasonable person to do so under similar circumstances, Wert, and a claimant must
show that he acted with ordinary common sense in quitting, made a reasonable effort
to preserve his employment, and had no real choice but to leave his employment.
Cowls v. Unemployment Compensation Board of Review, 427 A.2d 722, 723 (Pa.
Cmwlth. 1981).
            However, our Supreme Court made clear in Allegheny Valley School that
a determination of necessitous and compelling cause in the case of a voluntary
termination after a demotion does not consider the general factors set forth above but
focuses solely on the justification for the demotion. In Allegheny Valley School, the
claimant was demoted from an assistant manager position and was offered
employment either as a manager’s aide or as a developmental care specialist, both of
which included significant salary reductions. The claimant in that case refused these
options, voluntarily terminated his employment, and sought unemployment
compensation benefits.     The local service center found that the claimant had
necessitous and compelling reasons for voluntarily terminating his employment and,
hence, was not ineligible for benefits under section 402(b). The employer appealed
and a hearing was held before a referee.
            At this hearing, the employer presented testimony from the claimant’s
supervisors, all of whom discussed the claimant’s poor work performance and
inability to perform the responsibilities of his position. The referee found that the
claimant was demoted because of poor job performance but nevertheless concluded
that the demotion and resulting wage reduction created a necessary and compelling




                                           5
reason for the claimant to quit. The Board affirmed, as did this Court, noting that the
claimant made a good faith effort to work to the best of his abilities.
             However, our Supreme Court reversed, concluding that the claimant’s
demotion was justified because of his poor work performance. The court further
concluded that because the demotion was justified, the claimant did not have
necessitous and compelling reasons to quit.
             In light of this precedent, it is clear that a demotion premised on an
employee’s inability to perform his job responsibilities is justified and does not
constitute a necessitous and compelling reason to quit. Id. Conversely, a claimant
will have necessitous and compelling reasons to voluntarily terminate employment if
the demotion was unjustified. Id.
             This Court later applied the reasoning of Allegheny Valley School in
Diversified Care Management, LLC v. Unemployment Compensation Board of
Review, 885 A.2d 130 (Pa. Cmwlth. 2005), appeal denied, 907 A.2d 1104 (Pa. 2006).
In that case, the claimant had been assigned to work for one of the employer’s clients,
the Allegheny County Department of Human Services. While at work, the claimant
made several telephone calls on the County’s telephones following her son’s arrest
and the impounding of her car. Although there was no specific policy regarding the
use of the County’s telephones, the employer felt that the claimant’s use of the
County’s telephones showed a lack of good judgment and it decided to demote the
claimant. The claimant refused to accept the demotion, voluntarily terminated her
employment, and sought unemployment compensation benefits. The opinion does
not address the determination of the local service center. However, the referee
concluded that the claimant had necessitous and compelling reasons to quit and,
hence, she was not ineligible for benefits under section 402(b).



                                            6
             The Board affirmed, noting the lack of any specific policy regarding the
use of the County’s telephones and concluding that the employer was not justified in
demoting the claimant. On further appeal, this Court affirmed the Board’s decision,
similarly relying on the employer’s lack of evidence regarding any telephone policy
and the claimant’s unjustified demotion.       We specifically rejected Employer’s
argument that the Board erred in failing to “subject the issue of [c]laimant’s demotion
to a substantial change analysis . . . .” Id. at 132. Citing our Supreme Court’s
holding in Allegheny Valley School, we concluded that such an analysis was
“contrary to the established case law” and “not relevant.” Id. at 134. We stressed
that the inquiry in these types of cases focuses solely on whether the demotion was
justified.
             Applying the law to this case, we agree with Employer that a claimant
bears the burden to demonstrate that his voluntary termination of employment was
based upon a necessitous and compelling reason.              Wise v. Unemployment
Compensation Board of Review, 111 A.3d 1256, 1264 (Pa. Cmwlth. 2015).               The
Board specifically referenced this burden in its opinion. However, as the Board also
noted, a claimant meets this burden in demotion cases by establishing that the
demotion was not justified. Allegheny Valley School.
             In the present case, Claimant testified that there was no reason, including
any disciplinary reason, for his demotion. Employer sought to rebut Claimant’s
testimony by offering Overbeck’s testimony that Claimant’s demotion was premised
on a conversation with a driver who was resigning. In fact, as the Board noted, this
testimony represented the only evidence submitted by Employer relating to
Claimant’s demotion. However, Employer failed to present this driver as a witness or
otherwise attempt to corroborate this statement by a third party. As a result, the



                                           7
Board characterized this testimony as hearsay. The law is well settled that hearsay
evidence, admitted without objection, will be given its natural probative effect and
may support a finding of the Board, if it is corroborated by any competent evidence in
the record. Stugart v. Unemployment Compensation Board of Review, 85 A.3d 606,
608 (Pa. Cmwlth. 2014) (citing Walker v. Unemployment Compensation Board of
Review, 367 A.2d 366, 370 (Pa. Cmwlth. 1976)). However, a finding of fact based
solely upon hearsay will not stand.            Borough of Grove City v. Unemployment
Compensation Board of Review, 928 A.2d 371, 374 (Pa. Cmwlth. 2007).
                 The Board’s statement that Employer “did not present any competent
evidence to establish that the claimant’s demotion was his own fault” 4 merely
referenced Employer’s failure to rebut Claimant’s testimony that his demotion was
not justified. Contrary to Employer’s assertion, the Board did not impermissibly shift
the burden of proof to Employer. Because the Board determined that Claimant’s
demotion was not justified, the Board properly held that Claimant had a necessitous
and compelling reason to quit.
                 Accordingly, the order of the Board is affirmed.5


                                                 ________________________________
                                                 PATRICIA A. McCULLOUGH, Judge


       4
           Board’s decision at 2.

       5
         Employer also argues that the Board erred insofar as it relied on the factors set forth in
Brunswick Hotel & Conference Center, LLC, to conclude that Claimant’s reduction in pay and
benefits constituted necessitous and compelling reasons to quit. We agree with Employer in this
regard. As noted above, a determination of necessitous and compelling cause in the case of a
voluntary termination after a demotion focuses solely on the justification for the demotion and does
not consider the traditional factors as set forth in Brunswick Hotel & Conference Center, LLC. See
Allegheny Valley School.



                                                 8
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


RIO Supply, Inc. of PA,            :
                  Petitioner       :
                                   :    No. 1939 C.D. 2014
            v.                     :
                                   :
Unemployment Compensation          :
Board of Review,                   :
                 Respondent        :


                                ORDER


            AND NOW, this 18th day of September, 2015, the order of the
Unemployment Compensation Board of Review, dated September 30, 2014, is
hereby affirmed.




                                       ________________________________
                                       PATRICIA A. McCULLOUGH, Judge
