Title: Unemployment Insurance Appeal Board v. Division of Unemployment Insurance
Citation: N/A
Docket Number: 26, 2002
State: Delaware
Issuer: Delaware Supreme Court
Date: July 23, 2002

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
UNEMPLOYMENT INSURANCE 
§ 
APPEAL BOARD, 
 
 
§  No. 26, 2002 
 
 
 
 
 
 
§ 
 
 
Appellee Below,  
§  Court Below – Superior Court 
 
 
Appellant,  
 
§  of the State of Delaware, 
 
 
 
 
 
 
§  in and for Sussex County 
 
v. 
 
 
 
 
§  C.A. No. 01A-04-003 
 
 
 
 
 
 
§ 
DIVISION OF UNEMPLOYMENT § 
INSURANCE, 
 
 
 
§ 
 
 
 
 
 
 
§ 
 
 
Appellant Below,  
§ 
 
 
Appellee. 
 
 
§ 
 
 
 
 
 
  Submitted:  April 23, 2002 
 
 
 
 
     Decided:  July 23, 2002 
 
Before VEASEY, Chief Justice, WALSH and HOLLAND, Justices. 
 
 
Upon appeal from the Superior Court.  REVERSED. 
 
 
Stephani J. Ballard, Esquire, Department of Justice, Wilmington, 
Delaware, for appellant. 
 
 
Thomas H. Ellis, Esquire, Department of Justice, Wilmington, 
Delaware, for appellee. 
 
 
 
 
HOLLAND, Justice: 
 
 
2
 
This 
proceeding 
originated 
with 
separate 
applications 
for 
unemployment benefits by two claimants, Georgette Schaefer (“Schaefer”) 
and Patricia Whittier (“Whittier”).  It involves a temporary cessation of 
employment due to financial unprofitability where the claimants are both not 
only employees, but also corporate officers of the business.  It has led to 
different interpretations of the law by the appellee, the Department of Labor, 
Division of Unemployment Insurance (the “Department”) and the appellant, 
the Unemployment Insurance Appeal Board (the “Board”).   
This matter presents an issue of first impression for this Court.  The 
Superior Court held that Schaefer and Whittier were not entitled to receive 
unemployment benefits.  The Superior Court entered a final judgment in 
favor of the Department that reversed a decision of the Board in favor of the 
claimants.     
 
The Board has raised two contentions before this Court.1  First, the 
Board argues that the claimants’ status as employees, who are also corporate 
officers, does not preclude their eligibility for unemployment benefits since 
the applicable Delaware Unemployment Compensation Act specifically 
includes corporate officers within its purview.  Second, the Board submits 
                                          
 
1 The Board is a statutory party to all appeals from its decisions and is the appellant in 
this matter.  Del. Code Ann. tit. 19, § 3323(a) (1995); Robbins v. Glenn Deaton, Inc., Del. 
Super., C.A. No. 93A-05-001, Terry, J. (Feb. 6, 1995). 
 
3
that the Superior Court erroneously held that the claimants were not entitled 
to unemployment benefits, given the applicable standard of judicial review, 
since there is substantial record evidence to support the Board’s decision that 
the claimants were entitled to receive unemployment compensation benefits.   
 
We have concluded that both of the Board’s arguments are 
meritorious. Therefore, the judgment of the Superior Court must be reversed. 
Facts 
 
In 1997, Schaefer and Whittier formed Bad Girls, Incorporated.  The 
corporation’s business is a restaurant known as Plumb Loco, located in 
Rehoboth Beach, Delaware.  Schaefer is President of the corporation and 
owns fifty percent of the stock.  Whittier is Vice-President and owns fifty 
percent of the stock.  In addition to being officers and shareholders of the 
corporation, Schaefer and Whittier both work in the restaurant as employees. 
 
As employees of the restaurant, the claimants were each paid wages 
based upon the amount of work performed.  When they worked more hours 
in the summer, they earned more wages.  The claimants reported their wages 
to the Department of Labor.2  The restaurant business paid unemployment 
                                          
 
2 Schaefer reported wages as follows for 2000:  no wages for the first quarter; $5,097.14 
for the second quarter; and $13,290 for the third quarter.  Whittier reported wages as 
follows for 2000:  no wages for the first quarter; $7,500 for the second quarter; and 
$22,500 for the third quarter.   The claimants testified that the salary increases during the 
third quarter were due to the additional hours they worked during that quarter. 
 
4
taxes on those wages.   
 
In 1997, the claimants’ restaurant was open from May through 
December.  In 1998, the claimants closed the restaurant for the months of 
November and December.  In the year 1999-2000, the claimants closed the 
restaurant for the winter from October 30, 1999 until April 1, 2000.   
During the winter seasons when the claimants had left the restaurant 
open, the business operated at a loss.  In the years prior to 2000, the 
claimants had to transfer their personal funds into the restaurant account to 
cover business expenses.  The claimants submitted bank statements to 
document these facts.  The claimants also presented evidence that many 
restaurants are closed at the Rehoboth Beach area in the winter due to the 
seasonal decline in patronage. 
 
Because of the business’ history of unprofitability, the claimants 
decided to close the restaurant at the end of September 2000 and planned to 
reopen in April 2001.  It costs the business $6,000 to be closed and $11,000 
to be open during the slow winter season.  The $6,000 consists of rent.  The 
savings result from the elimination of variable costs and payments to 
employees. 
 
Although the claimants closed their business for several off-season 
months in 1998 and 1999, they did not file claims for unemployment 
 
5
compensation for those years.  Their first application for benefits was in 
October 2000 and gave rise to this litigation. 
Procedural History 
 
A Department of Labor Claims Deputy referred the claims by 
Schaefer and Whittier to an Appeals Referee for an initial determination of 
eligibility.  The Appeals Referee held hearings for both claimants on 
November 15, 2000.  Following the hearings, the Appeals Referee issued a 
decision, finding that each claimant was qualified for benefits.  The Appeals 
Referee found that the claimants’ voluntary termination of employment was 
for good cause attributable to the work, in that claimants’ decision to close 
their business for the winter months was a sound business decision based 
upon profit and loss.   
 
The Department appealed the decision of the Appeals Referee to the 
Board.  A hearing was held before the Board on January 31, 2001.  The 
Board also concluded that claimants were entitled to benefits.  The Board 
issued a decision, dated February 20, 2001, affirming the decision of the 
Appeals Referee. 
 
On February 26, 2001, the Department filed an appeal of the Board’s 
decision to the Superior Court in and for Kent County.  For jurisdictional 
reasons, that appeal was transferred to Sussex County.  The Superior Court 
 
6
issued an opinion, dated December 19, 2001, reversing the decision of the 
Board and holding that claimants were not entitled to benefits because they 
were not “unemployed through no fault of their own.”3  The Board filed a 
timely notice of appeal with this Court.  
Unemployment Eligibility Generally 
 
An “unemployed”4 individual is eligible to receive benefits if the 
Department finds that all of the terms in title 19, section 3314 of the 
Delaware Code are met.  This includes such factors as making a proper 
claim for benefits and being able and available for work.  Notwithstanding 
the “eligibility” factors of section 3314, a claimant may be found to be 
“disqualified” from benefits if one of the factors in title 19, Section 3315 of 
the Delaware Code is present.  These are factors such as being discharged 
from one’s work for good cause or voluntarily terminating one’s 
employment without good cause. 
 
In this case, the Department did not dispute that the claimants met all 
of the eligibility factors in section 3314.  Instead, the Department argues that 
the claimants were disqualified from benefits under section 3315(1) for 
voluntarily terminating their employment without good cause.  It is well 
                                          
 
3 Div. of Unemployment Ins. v. Schaefer, Del. Super., C.A. No. 01A-04-003 (Dec. 19, 
2001), Mem. Op. at 7. 
4 The term “unemployed,” as well as other statutory terms, is defined at Del. Code Ann. 
tit. 19, § 3302 (1995 & Supp. 2000). 
 
7
settled that a voluntary relinquishment of employment for good cause must 
be for reasons connected with the work and those reasons must be 
objectively reasonable.   
Employee Officer Eligibility 
Both fact-finders, the Appeals Referee and the Board, found that the 
claimants voluntarily terminated their employment, but for good cause in 
connection with their work because their temporary cessation of 
employment was necessitated by external, economic forces beyond their 
control.  In reversing the decision of the Board, the Superior Court focused 
on the claimants’ role as decision-making corporate officers.  The Superior 
Court held that their exercise of “control” as corporate officers precluded the 
claimants from demonstrating a voluntary termination of their own 
employment for good cause.  There is no dispute that any non-officer 
employees who were terminated, when the restaurant closed for the winter, 
were eligible to receive unemployment benefits if they met all of the 
statutory requirements.   
The claimants, as wage-earning employees of the corporation, 
reported their wages and paid unemployment taxes on their own wages into 
the Unemployment Compensation Fund since 1997.  The applicable 
Delaware statute specifically provides for corporate officer employees to be 
 
8
eligible for unemployment compensation by including their work within the 
definition of covered “employment:” 
“Employment” means: 
 
(A) 
. . . service performed after December 31, 1977, 
including service in interstate commerce, by 
(i) 
Any officer of a corporation after December 
31, 1995.5 
 
The same statute had previously excluded certain corporate officers (those 
with greater than one-fourth ownership interest) from the definition of 
“employment” and, therefore, from eligibility for benefits.6  Effective with 
services performed after December 31, 1995, however, all corporate officer 
employees, including those with a significant ownership interest (such as the 
claimants) who were previously excluded from the statutory scheme were 
included with the change in the definition to “[a]ny officer of a 
corporation.”7   
 
The Superior Court held that the claimants, as officers, controlled 
their own employment status and were, therefore, disqualified from 
unemployment benefits.   The Superior Court’s holding, that an exercise of 
control by a corporate officer precludes a termination of their own 
                                          
 
5 Del. Code Ann. tit. 19, § 3302(10)(A)(i) (1995). 
6 Del. Code Ann. tit. 19, § 3302(9)(A)(i)(II)(1985), amended by 70 Del. Laws, ch. 229 
(1995); see Horack v. Unemployment Ins. Appeal Bd., Del. Super., C.A. No. 96A-02-010, 
Toliver, J. (Nov. 15, 1996), Op. and Order at 2, n.2. 
7 See 70 Del. Laws, ch. 229 (1995). 
 
9
employment for “good cause,” is inconsistent with the General Assembly’s 
amendment of the Delaware Unemployment Compensation Act to 
specifically include corporate officers within the statutory definition of 
“employment.”  The current statutory scheme provides that, despite their 
role as “decision-makers” who can “control” aspects of the business, 
unemployment claims by corporate officers are to be assessed in the same 
objective manner as claims made by other employees who are not corporate 
officers.8   
 
The Department is validly concerned that corporate officer employees 
who make layoff decisions could attempt to abuse the unemployment 
insurance system.  The General Assembly’s statutory protection against the 
potential for systematic abuse by corporate officer employees is found in 
title 19, section 3315(1) of the Delaware Code.  The section provides that an 
                                          
 
8 See Dir., Dep’t of Indus. Relations v. Ford, 700 So.2d 1388 (Ala. Civ. App. 1997) 
(economic forces constituted good cause for claimant to terminate his employment from 
his business); Carlsen v. Unemployment Ins. Appeals Bd., 134 Cal. Rptr. 581 (Cal. Ct. 
App. 1976) (claimant’s control over the power to compensate himself did not render 
claimant ineligible for benefits so long as there was good cause to terminate his own 
employment); Bartelt v. Employment Appeal Bd., 494 N.W.2d 684 (Iowa 1993) 
(claimant’s separation was not “voluntary” where he filed for bankruptcy, as the 
corporation’s President, due to economic reasons); Taylor v. Employment Div., 597 P.2d 
780 (Or. 1979) (claimant “unemployed” where his wage earning work ended but he 
continued to perform corporate duties); Sullivan v. Employment Div., 600 P.2d 965 (Or. 
Ct. App. 1979) (claimants’ control, as sole owners of two corporations, over the timing of 
their compensation did not render them “employed” all year); Dumont v. Hackett, 390 
A.2d 374 (R.I. 1978) (claimant was “totally unemployed” where his wage earning work 
had slowed to a standstill but he was still soliciting business for his corporation for no 
pay).  
 
10
individual who relinquishes his or her employment will be disqualified from 
receiving unemployment compensation unless he or she does so for “good 
cause attributable to such work.”9  The causative factor for terminating 
employment must be objectively reasonable.  The burden of proving 
compliance with section 3315(1) is on the claimant.10   
Standard of Review 
 
The Delaware Unemployment Compensation Act sets forth the 
applicable standard of judicial review for a Board decision.  “[T]he findings 
of the [Board] as to the facts, if supported by evidence and in the absence of 
fraud, shall be conclusive, and the jurisdiction of the Court shall be confined 
to questions of law.”11  This Court has held that the sole function of the 
reviewing courts on appeal from an administrative board “is to determine 
whether or not there was substantial competent evidence to support the 
finding of the Board, and, [if so], to affirm the findings of the Board.”12   
The Board correctly acknowledged “that ‘employment’ for purposes 
of eligibility includes services performed by ‘any officer of a corporation 
                                          
 
9 Del. Code Ann. tit. 19, § 3315(l) (Supp. 2000). 
10 Moore v. Fulton Paper Co., 1995 Del. LEXIS 230, at *4 (Del. Supr.); accord 
Longobardi v. Unemployment Ins. Appeal Bd., 287 A.2d 690, 692 (Del. Super. Ct. 1971), 
aff’d, 293 A.2d 295 (Del. 1972). 
11 Del. Code Ann. tit. 19, § 3323(a) (1995). 
12 Johnson v. Chrysler Corp., 213 A.2d 64, 66-67 (Del. 1965). 
 
11
after December 31, 1995.”13  The Board found that claimants were corporate 
officers and employees who had paid assessments into the unemployment 
fund and reported wages for themselves as employees.  The Board held that, 
as corporate officers, the claimants were eligible for benefits in the same 
objective manner as other employees, if the other statutory standards for 
compensation were met.  Since the Board properly construed the Delaware 
Unemployment Compensation Act, the only question for judicial review was 
whether substantial competent evidence in the record supported the Board’s 
findings that the claimants were eligible to receive unemployment benefits.  
Substantial Record Evidence 
The claimants testified that they had, in previous years, tried to keep 
their beach restaurant open year-round, but had operated at a financial loss 
during the winter months.  The claimants testified and provided bank 
statements showing that in previous winters they had to transfer their 
personal money into the business accounts to meet expenses.  The claimants 
testified about the general lack of business at beach restaurants during the 
winter season.  The Board accepted and relied upon this evidence in support 
of its decision.   
                                          
 
13 Del. Code Ann. tit. 19, § 3302(10)(A)(i) (1995).  The predecessor statute did not allow 
an individual who owned one-fourth or more of the ownership interest in the corporation 
during the employment to collect benefits.  See Horack v. Unemployment Ins. Appeal Bd., 
Del. Super., C.A. No. 96A-02-010, Toliver, J. (Nov. 15, 1996), Op. and Order at 2, n.2. 
 
12
In these proceedings, the Department has consistently argued that 
claimants engaged in a bad faith, “considered plan” to obtain “a subsidy 
from the state” in the form of unemployment insurance benefits.  
Nevertheless, the Appeals Referee concluded that the claimants had good 
cause to close the business during the winter to avoid financial losses to their 
business and to enable it to remain profitable.  The Board, as the ultimate 
fact-finder also rejected the Department’s argument, finding the claimants’ 
testimony and evidence to be credible that the temporary closing of the 
business was impelled by economic factors, explicitly “finding that 
claimants acted in good faith.”14   
The Superior Court concluded that the “claimants’ respective states of 
unemployment [were] matters over which the claimants had control and 
result[ed] from a deliberate decision to tailor the terms of employment, and 
particularly, compensation, in such a way as to avail themselves of 
unemployment compensation benefits.”15  The claimants’ intentions or 
motives rest on a determination of their credibility.  These issues were 
resolved in the claimants’ favor by the Board, as the finder of fact.  
Questions of credibility are exclusively within the province of the Board 
                                          
 
14 Schaefer, Nos. 717987/717988, (Del. Dep’t Labor, UIAB Jan. 31, 2001) (decision). 
15 Div. of Unemployment Ins. v. Schaefer, Del. Super., C.A. No. 01A-04-003 (Dec. 19, 
2001), Mem. Op. at 7. 
 
13
which heard the evidence.  As an appellate court, it was not within the 
province of the Superior Court to weigh the evidence, determine questions 
of credibility or make its own factual findings.   
The Board found that the claimants made a sound business decision to 
close their business for the winter due to financial unprofitability and, as 
such, left work for good cause attributable to the work.  The Board’s 
findings that claimants acted in good faith and were motivated by adverse 
economic factors beyond their control are supported by substantial 
competent evidence.  Accordingly, the Board properly decided that the 
claimants were entitled to receive unemployment insurance benefits.   
Conclusion 
 
The judgment of the Superior Court is reversed.  This matter is 
remanded for further proceedings in accordance with this Opinion.