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  • Writer's pictureSwansburg & Smith PLLC

Ky. Supreme Court Rejects Challenge to Employer Pro Se Representation for Unemployment Insurance

By: J. Brooken Smith

Kentucky employers gained some much-needed clarity concerning the right to represent themselves in administrative proceedings involving unemployment benefits thanks to a recent Kentucky Supreme Court decision in Kentucky Unemployment Insurance Commission v. Michael Nichols, et al., 2019-SC-000477-D.

The decision arose in the midst of an ongoing dispute over a claim for unemployment benefits. Besides arguing over administrative decisions disqualifying the former employee, Michael Nichols, from receiving benefits, Nichols and his former employer squared off in court over the constitutionality of KRS 341.470(3), which allows employers, during unemployment proceedings before an administrative hearing officer (known as a referee) or the Kentucky Unemployment Insurance Commission, to be represented by a non-attorney. (Another provision, KRS 341.470(2), permits claimants to represent themselves in these proceedings, but its validity was not at issue in this case). The statute thus offers employers a way around Supreme Court Rule 3.020, which generally prohibits corporations from self-representation except in small claims court, and it is also incorporated into an exception to KRS 524.130, which creates criminal penalties for anyone who practices law without a license.

Relying on KRS 341.470(3), the employer in Nichols opted to be represented by a non-attorney at the referee hearing. The record indicates that the non-attorney representative answered questions posed by the referee and directly questioned Nichols. After the referee denied Nichols’s claim for benefits, and the Kentucky Unemployment Insurance Commission subsequently upheld the decision, Nichols argued that the decisions were invalid because KRS 341.470(1) infringes on the Kentucky Supreme Court’s exclusive right under the state Constitution to regulate the practice of law.

Citing Turner v. Kentucky Bar Ass’n, 980 S.W.3d 560 (Ky. 1998), a case in which the Kentucky Supreme Court invalidated a statute allowing non-attorney state employees to provide advice to workers compensation claimants, the Kentucky Court of Appeals sided with Nichols and found that KRS 341.470(3) violates the Kentucky Constitution’s separation of powers provisions. As part of its ruling, the Court of Appeals concluded that “representation of a corporate or nonnatural entity by a non-attorney implicates the unauthorized practice of law” and ordered a new hearing.

Taking the case on discretionary review, the Kentucky Supreme Court turned aside Nichols’s challenge to KRS 341.470(3) without deciding whether it is, in fact, unconstitutional. Instead, it found that Nichols lacked standing to challenge the statute because the alleged constitutional violation did not cause him to suffer any injury. In doing so, the Supreme Court rejected the argument that the testimony of the employer’s representative – which Nichols contended had falsely stated the reason he was terminated – caused the denial of benefits. Among other things, the Kentucky Supreme Court ultimately found this contention to be speculative and too attenuated, in part because the hearing afforded Nichols the opportunity to question the representative and correct any misinformation. The Kentucky Supreme Court, therefore, reversed the Kentucky Court of Appeals and sent the case back to address unresolved issues concerning the underlying denial of Nichols’s application for benefits.

Although the constitutionality of KRS 341.470(3) ultimately remains undecided, it appears that employers’ right to appear pro se at unemployment administrative proceedings is secure, at least for now. Indeed, if claimants generally lack standing to challenge the statute’s constitutionality, it is unclear how such a challenge might be brought or who might bring it. Notably, the Attorney General of Kentucky weighed in, arguing that KRS 341.470 does not permit the unauthorized practice of law because it merely permits an employer to “tell its side of the story of a termination through factual testimony.” The Attorney General continued: “Non-lawyer representatives … are not providing legal counsel to a client; they are not making legal arguments; they are not rendering any services involving legal knowledge or advice.”

For its part, the Kentucky Supreme Court seemed to agree with this proposition. Correcting the Kentucky Court of Appeals’s characterization of Turner, the Kentucky Supreme Court stated that what constitutes the practice of law depends on actions taken by the non-attorney, not the type of proceeding in which those actions take place: “If no legal advice is being given or legal rights are being adjudicated,” the Kentucky Supreme Court noted, “it is unlikely this Court would find that the non-attorney is engaging in the practice of law.” This cryptic finale suggests that while the Kentucky Supreme Court was not greatly troubled that KRS 341.470(3) permits the practice of law by non-lawyers, it was not prepared to wholeheartedly embrace that conclusion. And it potentially leaves the door open to finding that a non-lawyer is practicing the law if his or her conduct involves using legal knowledge to advocate the employer’s position or providing legal advice.

Nevertheless, it appears that Nichols has lifted the cloud over KRS 341.470(3), and employers may continue to use non-lawyers to represent them at adminstrative unemployment hearings. However, employers may do well to consider whether their interests may be better served by employing legal counsel in cases that are likely to be hotly contested or may require knowledge of unemployment, administrative, or procedural laws to effectively advocate the employer’s position.


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