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Rudbart v. Board of Review

April 16, 2001


Before Judges Keefe,*fn1 Steinberg and Weissbard.

The opinion of the court was delivered by: Steinberg, J.A.D.


Argued March 14, 2001

On appeal from the Board of Review, Department of Labor.

Petitioner Lawrence Rudbart appeals a decision of the Board of Review which affirmed the decision of the Appeal Tribunal denying him unemployment compensation benefits. We reverse.

Petitioner was employed as a salesman for New York Sash & Door Co., Inc. (the Employer). In addition, he held twenty-five percent of its stock. The employer had operated its business on leased property. The landlord decided to sell the property, and in September 1999, the employer decided to cease operations rather than relocate. Petitioner said the corporate attorney advised against dissolution. When asked about his stock ownership, petitioner said he "traded them back to the corporation because the corporation is closed." He said, "I think the term is treasury stock. I'm not an accountant." However, he also said he received no payment for the stock.

Although the corporation was not in the process of formal dissolution at the time the claim was filed, petitioner alleged it would be "dissolved at some point . . . in the future." According to petitioner, he received approximately $5,000 from the employer after some bills had been paid, and he anticipated receiving another $5,000 "when we clear up all of the other bills." He said all of the assets had been sold at auction.

The Appeal Tribunal upheld the determination of the Deputy, finding that the employer was not in bankruptcy or dissolved, and, consequently petitioner did not meet the statutory definition of being "unemployed" since he was a corporate officer, and the corporation had been neither dissolved nor in bankruptcy. The Board of Review upheld that determination "for the reasons set forth therein except that the Opinion should reflect that the claimant held a 25% equity share of the corporation rather than a corporate officer." Petitioner appeals, claiming he "is entitled to unemployment insurance benefits."

Petitioner appeared without counsel before the Appeal Tribunal and the Board of Review. He engaged counsel for this appeal. For the first time, he now asserts that "[t]he corporation could not be dissolved because of the threat of serious potential environmental liability of the shareholders for activities that they did not create." He contends that prior owners of the employer had allowed underground storage tanks to be installed and used on the property resulting in a serious gasoline leak. He claims that the corporation was not dissolved in order to avoid possible imposition of individual liability upon the shareholders.

Counsel's insertion in his appellate brief of facts outside the record below is inappropriate. Generally, when reviewing trial errors, we confine ourselves to the record. State v. Harvey, 151 N.J. 117, 201-02 (1997); County of Bergen v. Borough of Paramus, 79 N.J. 302, 309-10 n.2 (1979); Monmouth County Serv. v. P.A.Q., 317 N.J. Super. 187, 195 (App. Div. 1998). He asks in his brief that we "order supplementation of the record by the taking of additional testimony and the introduction of pertinent documents," relying on R. 2:5-5(b). That rule contemplates the filing of a formal motion seeking that relief, in advance of oral argument. However, since we are compelled to reverse and remand, we direct that on remand petitioner be given the opportunity to supplement the record, subject, of course, to the Agency's right to reject a proffer of evidence it deems immaterial.

The burden of proof rests upon petitioner to establish his right to unemployment compensation benefits. Zielenski v. Board of Review, 85 N.J. Super. 46, 51-2 (App. Div. 1964). To establish eligibility for unemployment benefits, a person must be "unemployed" for any week during which "[t]he individual is not engaged in full-time work and with respect to which his remuneration is less than his weekly benefit rate." N.J.S.A. 43:21-19(m)(1)(A). However, an individual is not unemployed, and is therefore disqualified from benefits if he or she is either an officer of a corporation, or a person who has more than a 5% equitable or debt interest in the corporation, if his or her claim for benefits is based on wages with that corporation. Ibid. The disqualification is for any week during the individual's term of office or ownership in the corporation. Ibid. The disqualification applies "only if the person continues to be an officer or a more than 5% owner or creditor in any week for which he claims benefits." Nota v. Board of Review, 231 N.J. Super. 341, 343 (App. Div. 1989).

Relying upon Nota, petitioner contends he is entitled to benefits because the corporation had ceased doing business. To be sure, in Nota we held that the statutory exception did not apply. A claimant may disassociate himself from a corporation that was his last employer, not only by resigning his office or disposing of his stock or debt interest, but also the association is broken if the corporation permanently ceases doing business. Id. at 346. Nonetheless, we also observed that the agency may reasonably require a corporation to dissolve in order to establish it had permanently ceased doing business. Ibid. Nevertheless, in the absence of a regulation, we held that the agency could not deny benefits by determining that the corporation must be dissolved before it can be considered to have permanently ceased doing business. Id. at 347. Thus, we held that in the absence of a regulation to the contrary, a petitioner who otherwise qualifies as "unemployed" is entitled to benefits if the corporation had permanently ceased doing business before the period for which he claims benefits, even though the corporation has not been formally dissolved. Id. at 347-48.

However, in response to Nota, the Department of Labor promulgated N.J.A.C. 12:17-12.1(a) which provides, as follows:

An officer of a corporation and/or a person who has more than five per cent equitable or debt interest in the corporation, whose claim for benefits is based on wages with that corporation, shall not be considered unemployed in any week during the individual's term of office or ...

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