The Superior Court of New Jersey, Appellate Division, recently invalidated a regulation of the New Jersey Unemployment Compensation Act (UCA) that attempted to define, for the first time in codified form, the concept of “simple misconduct” by an employee that can limit his or her eligibility for unemployment benefits under the UCA. By way of background, the UCA (per N.J.A.C. 12:17-2.1, which was adopted in April 2015) established three “tiers” of misconduct to determine an employee’s eligibility for unemployment benefits: (1) gross misconduct; (2) severe misconduct; and (3) simple misconduct (defined as neither “severe misconduct” nor “gross misconduct” and which is an act of wanton or willful disregard of the employer’s interest, a deliberate violation of the employer’s rules, a disregard of standards of behavior that the employer has the right to expect of his or her employee, or negligence in such degree or recurrence as to manifest culpability, wrongful intent, or evil design, or show an intentional and substantial disregard of the employer’s interest or of the employee’s duties and obligations to the employer).

The Appellate Division found that the regulation’s “simple misconduct” definition “confusingly mixes in concepts of ‘negligence’ with intent-based concepts such as ‘willful disregard,’ ‘evil design,’ ‘wrongful intent,’ and similar states of mind,” and invalidated the regulation as “arbitrary and capricious.” However, to avoid disruption in the statewide administration of the unemployment benefits program, the Appellate Division issued a stay of its decision for a 180-day period to enable the New Jersey Department of Labor and Workforce Development to take appropriate corrective action or, alternatively, pursue further review in the Supreme Court of New Jersey.