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In a surprise opinion issued April 26, the Kentucky Court of Appeals held unconstitutional the Kentucky statute permitting non-lawyers to represent employers in unemployment compensation proceedings. The decision, Nichols v. Kentucky Unemployment Insurance Commission, upends decades of standard practice within the Commonwealth of permitting employers who contest former employees’ claims for unemployment benefits to designate a non-lawyer company employee (usually a human resources officer or manager) to represent their interests in administrative unemployment hearings.
In Nichols, the Court of Appeals held that Kentucky Revised Statute (KRS) 341.470, which explicitly authorized a managerial representative to represent a corporate or partnership employer in an unemployment proceeding, violates the separation of powers of the Kentucky Constitution by “encroach[ing] on the exclusive power of the judiciary to establish rules related to the practice of law.” The Court recognized that Kentucky Supreme Court Rule (SCR) 3.020 holds that representation of a corporate entity by a non-attorney amounts to the unauthorized practice of law. Because the statutory language of KRS 341.470(3) was at odds with the Supreme Court Rule, it infringed upon the judiciary’s exclusive power to govern the practice of law and was therefore unconstitutional.
The decision has immediate and substantial effects on employers within the Commonwealth in the unemployment insurance context, and potentially beyond. As an initial matter, Kentucky employers should immediately cease the practice of sending supervisors, HR managers, or other non-lawyer representatives of the employer to represent them at unemployment proceedings, or risk a finding that the non-lawyer representative was engaged in the unauthorized practice of law, thus making any decision in the employer’s favor invalid. Further, if an employer appears at an unemployment compensation proceeding with an unauthorized non-lawyer representative, the agency may consider the employer to have made no appearance at all and, therefore, be in default. Moreover, any person who engages in the unauthorized practice of law in Kentucky without a license issued by the Supreme Court of Kentucky may be subject to an injunction, a finding of contempt, or even a criminal complaint.
Moving forward, Kentucky employers should also be cautious about the continued use of non-lawyer representatives in other administrative proceedings given that the reasoning of the Nichols decision could be applied across any number of administrative agency proceedings in which employers routinely rely on non-lawyer representatives to respond. For example, a non-lawyer representative appearing on behalf of an employer for proceedings before the Kentucky Commission on Human Rights, the Kentucky Labor Cabinet, OSHA investigations, OFCCP audits, and the like, could be engaging in the unauthorized practice of law. Thus, on a practical level, all Kentucky employers will now need legal advice on their entire approach for the handling of these proceedings.