No. 45, May Term, 1979, Appeal from the Order of the Commonwealth Court in Number 1304 C.D. 1977, April 3, 1979, reversing the Decision and Order of the Unemployment Compensation Board of Review, Decision No. B-145343
James K. Bradley and Daniel R. Schuckers, Harrisburg, for appellant.
Marian E. Frankston, Michael Klein, Harrisburg, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Larsen, Flaherty and Kauffman, JJ. O'Brien, C. J., and Nix, J., concur in the result. Roberts, J., filed a concurring opinion, in which Larsen and Flaherty, JJ., join. Flaherty, J., filed a concurring opinion.
The Unemployment Compensation Board of Review ("Board of Review") appeals from an order of the Commonwealth Court reversing the Board of Review and allowing payment of unemployment compensation benefits to Theresa J. Ceja ("claimant").*fn1 At issue is the nature of the evidence presented against claimant at her compensation hearing, the manner in which the hearing was conducted, and, more generally, the validity of the existing standard for evaluating uncorroborated hearsay evidence admitted without objection at administrative hearings.
On January 4, 1977, claimant was dismissed from her job as a calculating operator with the Commonwealth of Pennsylvania, Department of Revenue ("employer"), by whom she had been employed for ten years. The Bureau of Employment Security denied her unemployment compensation benefits after determining that she had been discharged for willful misconduct and was therefore, precluded from receiving compensation by Section 402(e) of the Unemployment Compensation Law, Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(e).*fn2 Claimant appealed and, after a hearing before a referee, was
again denied benefits. The Board of Review affirmed the referee's decision and made the following findings of fact:
1. Claimant was last employed by the Pennsylvania Department of Revenue, Harrisburg, Pennsylvania, as a calculating operator at a rate of $5.30 per hour. Her length of employment covered 10 years. Her last day of work was January 13, 1977.
2. The claimant had been repeatedly warned about her refusal to follow instructions and the causing of disruptions in her work area; the claimant had been disciplined for such conduct.
3. On December 6, 1976 the claimant directed abusive and profane language at her supervisor.
4. The employer, after investigating the incident of December 6, 1976, discharged the claimant.
Relying on these findings, the Board of Review concluded that claimant's "conduct was clearly insubordinate and rose to the level of willful misconduct under Section 402(e) of the Unemployment Compensation Law" and, therefore, that she was ineligible for benefits.
Claimant then appealed to the Commonwealth Court which reversed the Board of Review, concluding that employer had failed to sustain its burden of proving willful misconduct because it had presented only uncorroborated hearsay evidence.*fn3 The Court relied on its decision in Walker v. Unemployment Compensation Board of Review, 27 Pa. Commw. 522, 367 A.2d 366 (1976), which held that hearsay, even though admitted without objection, could not support a Board of Review finding unless it was corroborated by competent evidence. We granted allocatur to consider the appropriateness of the Walker guidelines for evaluating hearsay evidence in administrative hearings.
The evidence offered by employer without formal objection by claimant at the hearing consisted of various memoranda and letters pertaining to claimant's employment history.*fn4
These documents included two notices of suspension, one in August 1973 and the other in November 1975, based upon alleged belligerent attitude and insubordination, including the use of abusive language. Claimant, who was not represented by counsel at the hearing, admitted that she had been suspended twice in her ten-year employment, but denied the reasons for suspension indicated in the offered documents.
Employer's documents further alleged that on December 6 and 7, 1976, claimant created a disturbance by calling her supervisor an "S.O.B." As evidence of this incident which led directly to claimant's dismissal, employer offered: (1) The December 10, 1976 memorandum of Francis J. Donleavy, Chief of the Taxing and Resettlement Division, to Peter Capataides, Director of the Bureau of Corporation Taxes, describing claimant's behavior on December 6 and 7, as told to him by others; (2) a letter written December 13, 1976 by Mr. Capataides to Darleen Fritz, Assistant to the Secretary of Revenue, recommending claimant's dismissal; (3) two eyewitness accounts of claimant's behavior on December 6 and 7, written on December 14, 1976, at the request of the Bureau's Assistant Director, a week after the incidents and a day after the letter recommending dismissal. Although she never formally objected to this evidence, claimant expressly denied calling her supervisor an "S.O.B." and stated that the memoranda were inaccurate and "twisted." Employer failed to call any witness with personal knowledge of the events in dispute or of the manner in which the documentary evidence had been prepared.
The Board of Review argues initially that, notwithstanding the Walker guidelines, no corroborative evidence is necessary because employer's documents are themselves legally
competent evidence under the Uniform Business Records as Evidence Act (UBREA), Act of May 4, 1939, P.L. 42, 28 P.S. §§ 91a-91d.*fn5 After carefully examining the record, however, we conclude that employer's documents do not meet the UBREA criteria. Employer's counsel, without calling any witnesses, simply placed himself under oath and introduced the documents as employer's total case. Nothing in the record indicates that he had any first-hand knowledge of the incidents described in the documents, nor was there any attempt to establish him either as the custodian of the documents or in any way qualified to testify to their identity and mode of preparation.
To qualify as competent evidence under the UBREA, the records in question must be shown to have been made in the regular course of business at or near the time of the events they describe. Here, however, no attempt was made to demonstrate that these documents were prepared in the regular course of business. They are not on special forms which might indicate the manner in which disciplinary problems are customarily reported, nor is there any testimony showing that disciplinary problems are handled in any standard, routine manner. The employer failed to lay any foundation for introduction of its documents as business records, and thus they are not competent evidence under the UBREA exception to the hearsay rule. As such, the Commonwealth Court properly treated employer's documents as uncorroborated hearsay.
The Court consequently applied the Walker standards rejecting the use of hearsay as the sole basis for a finding of
fact, and held that employer had failed to meet its burden of proving willful misconduct.*fn6 The Board of Review argues, however, that the Walker rule regarding unobjected to hearsay does not rest on sound legal principle and must, therefore, be overruled. The remainder of this opinion will examine the Walker rule and evaluate the proceedings below in the context of our analysis.
It is axiomatic that the rules governing admission of proof in judicial trials, which are designed to protect juries from unreliable and sometimes confusing evidence, are less useful in the administrative context, and may often be counter-productive. Professor Wigmore's classic treatise on evidence noted:
Underlying this view is an understanding that administrative agencies are responsible for developing efficient methods of carrying out legislative policy; they develop experience and expertise through adjudication in order to best serve the public interest in executing legislative mandates. It is thus necessary for agencies to "keep open the channels for the reception of all relevant evidence which will contribute to an informed result."*fn8 Section 505 of the Administrative Agency Law, 2 Pa.C.S.A. § 505,*fn9 ("Section 505") reflects this consideration:
Agencies shall not be bound by technical rules of evidence at agency hearings and all relevant evidence of reasonable probative value may be received. Reasonable examination and cross-examination shall be permitted. (Emphasis supplied).
Moreover, from a purely practical standpoint, in dealing with countless thousands of compensation claims -- as, for example, social security, workmen's compensation, or unemployment compensation -- it is unrealistic to expect hearing officers to apply the strict exclusionary rules of evidence. A widely acclaimed report on administrative practice in New York State several decades ago observed:
[S]uccessful application of the law of evidence requires trained and experienced judges . . . Its successful application requires also trained and experienced counsel. The law of evidence as applied in judicial proceedings is not self-executing . . . It is a frequent characteristic of [state] quasi-judicial proceedings that the hearing officer is not a trained lawyer; nor would mere legal training of hearing officers assure expertness in the field of evidence. It is another frequent characteristic of quasi-judicial proceedings that the parties are not represented by counsel. The essential conditions of the successful application of the rules of evidence are therefore lacking, in many instances. For those instances at least, administrative adjudication must be able (as in my judgment it is) to operate satisfactorily without legal requirement that the exclusionary rules of evidence be applied.*fn10
Against this background, however, is the countervailing consideration of fairness and due process for the litigants before the agency. Whether and how to admit and accord weight to hearsay evidence is perhaps the most common due process question raised in judicial review of such administrative decisions. Unfortunately, the resolution of this issue is entirely without uniformity in the various jurisdictions across the country.
Professor McCormick, in his penetrating one-volume study on the law of evidence, persuasively argues for elimination of the restrictions against admission of hearsay in administrative tribunals:
Many reasons support the open admission of hearsay and other legally incompetent evidence in administrative hearings. Foremost among them is the fact that the exclusionary rules do not determine the probative value of the proferred evidence. Professor Davis, the leading proponent that hearing officers should make no distinction between hearsay and non-hearsay evidence makes the point this way:
"[T]he reliability of hearsay ranges from the least to the most reliable. The reliability of non-hearsay also ranges from the least to the most reliable. Therefore, the guide should be a judgment about the reliability of particular evidence in a particular record in particular circumstances, not the technical hearsay rule with all its complex exceptions." [Davis, Hearsay in Administrative Hearings, 32 Geo.Wash.L.Rev. 689 (1964)].
To require that a trial examiner refuse to admit hearsay makes no sense where there is no jury to protect and the trier of fact is equally exposed to the evidence whether he admits or excludes it. Admission without a ruling -- as long as the evidence has some element of reliability -- does no harm and can prove more efficient than the requiring
of a ruling which may later be held erroneous. Discarding the exclusionary rules of admission eliminates the need for the parties to interpose protective objections -- the objections being preserved by their briefs to the examiner or agency -- and relieves the examiner of making difficult rulings before the evidence is available. It assures a competent yet not necessarily an unduly long record and might well avoid the need to reopen the record. Hearsay, of course, is not subject to current, in-court cross-examination but that limitation affects the weight the evidence carries, not its admissibility.*fn11
But McCormick continues with the following admonition:
Nevertheless, the more difficult -- and often crucial -- question for the hearing officer is the determination of whether he should rely upon hearsay evidence in reaching his decision. The examiner's concern is with the reliability or probative worth of the evidence. Jury trial rules of evidence exclude hearsay on the theory that it is untrustworthy unless within an exception. The party against whom the evidence is admitted can neither confront nor cross-examine the out-of-court declarant to test its probative worth.*fn12
In Pennsylvania, the seminal case attempting to reconcile these apparently competing interests was McCauley v. Imperial Woolen Co., 261 Pa. 312, 104 A. 617, (1918), in which we considered the evidentiary standards embodied in the then current workmen's compensation law:
The act permits liberal investigation, by hearing and otherwise; but, after all the data has been gathered without regard to technical rules, then the proofs must be examined, and that which is not evidence within the meaning of the law, must be excluded from consideration; that is, to say, when all the irrelevant and incompetent testimony has been put aside, the findings must rest upon such relevant and competent evidence of sound, probative character
as may be left, be this either ...