Jahn v. Director of Div. of Employment Sec.

• Decision Date: 11 March 1986
• Parties: David M. JAHN v. DIRECTOR OF the DIVISION OF EMPLOYMENT SECURITY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 998

489 N.E.2d 998

397 Mass. 61

David M. JAHN v. DIRECTOR OF the DIVISION OF EMPLOYMENT SECURITY.

Supreme Judicial Court of Massachusetts,

Hampden.

Argued Jan. 8, 1986.

Decided March 11, 1986.

Francis Joseph Lafayette, Granby, for employee.

Francis X. Bellotti, Atty. Gen., and Willie Ivory Carpenter, Jr., Asst. Atty. Gen., for Director of the Div. of Employment Sec., submitted a brief.

Before HENNESSEY, C.J., and LIACOS, ABRAMS, LYNCH and O'CONNOR, JJ.

HENNESSEY, Chief Justice.

David M. Jahn appeals from a decision of the District Court affirming the denial of unemployment compensation benefits. Jahn was disqualified under G.L. c. 151A, § 25 (e)(1) (1984 ed.), on the ground that he left work voluntarily without good cause attributable to the employing unit.

We summarize the findings of fact made by the review examiner of the Division of Employment Security. ¹ Jahn was president and part-owner of the Jahn Catering Service, Inc., a business corporation which operated a restaurant and food catering service in Springfield. Jahn worked full time as manager and executive chef of the business. Jahn owned 55% of the corporate stock of the Jahn Catering Service, Inc. The remaining shares were held by Jahn's family members.

In 1984, after nine years of operation, Jahn sold the business due to its low profitability, and the fact that "he was barely able to meet his bills." The business was sold for $69,000. As a result of this sale, Jahn was left without employment.

Two days after the sale of the business, Jahn applied for unemployment benefits. After a hearing before a review examiner, Jahn was denied benefits. The examiner found that Jahn's unemployment was the result of his voluntary sale of the business, and that he therefore left work "voluntarily without good cause attributable to the employer" within the meaning of disqualification (e)(1). G.L. c. 151A, § 25 (1984 ed.). Jahn challenges his disqualification as arbitrary and capricious, an abuse of discretion, and unsupported by substantial evidence. ²

The purpose of unemployment compensation is to provide relief to those employees who, through no fault of their own, are separated from their employment. See Raytheon Co. v. Director of the Div. of Employment Sec., 364 Mass. 593, 596, 307 N.E.2d 330 (1974); Farrar v. Director of the Div. of Employment Sec., 324 Mass. 45, 48, 84 N.E.2d 540 (1949). Where an employee who is also a majority shareholder exercises his controlling interest in the company to effectuate a sale, his separation from employment is properly deemed voluntary and subject to disqualification under § 25 (e )(1). In Faria v. Director of the Div. of Employment Sec., 350 Mass. 397, 215 N.E.2d 90 (1966), we allowed benefits where an employee holding 25% of the shares in a closely held construction company lost his job due to the lack of new construction contracts. In that case we specifically noted, however, that there was "no suggestion that he or his corporation made any attempt to cause his unemployment." Id. at 399, 215 N.E.2d 90. By contrast, where a controlling shareholder of a closely held corporation voluntarily sells the very business in which he is employed, ³ he has created his own unemployment and resulting disqualification. There was no error of law.

Of course, an employee will not be considered to have left work "voluntarily" within the meaning of § 25(e)(1) where he leaves his job for compelling personal reasons. See Dohoney v. Director of the Div. of Employment Sec., 377 Mass. 333, 335, 386 N.E.2d 10 (1979); Raytheon Co., supra, 364 Mass. at 596, 307 N.E.2d 330. However, the burden of proving these compelling circumstances rests with the claimant. See Uvello v. Director of the Div. of Employment Sec., 396 Mass. 812, 489 N.E.2d 199 (1986).

In this case the review examiner specifically found that "the evidence presented does not indicate that [Jahn] was compelled to sell the business for financial reasons." This finding is supported by substantial evidence. See Abramowitz v. Director of the Div. of Employment Sec., 390 Mass. 168, 173, 454 N.E.2d 92 (1983) (standard of review). The tax returns of the business indicate a net income of $8,445 in 1981; a loss of $4,634 in 1982; and a net income of $3,660 in 1983. During those years, the annual salary paid to corporate officers ranged from $22,000 to $40,000. In 1984, the net proceeds from the sale of the business after outstanding debts had been paid totalled $40,000. These figures support the conclusion that Jahn's sale of the business was voluntary.

We affirm the judgment of the District Court affirming the board's decision.

So ordered.

1 The board of review of the Division of Employment Security adopted the findings and conclusion of the review examiner without hearing, thus rendering the decision of the review examiner final for the purpose of...