Nearly 500 FairPoint workers might have to repay four months of unemployment compensation after a state commissioner ruled Friday that they were ineligible for the benefits during a strike.

Jennifer Duddy, chairwoman of the Unemployment Insurance Commission, reversed a ruling from June that found the telecommunications workers eligible for unemployment benefits. About 900 workers in Maine were on strike from October 2014 to February after negotiators failed to reach a contract between the International Brotherhood of Electrical Workers and the Communication Workers of America and the North Carolina-based firm.

FairPoint workers picket in October 2014 at the company's offices on Davis Farm Road in Portland. A state commissioner has reversed a ruling that FairPoint workers who went on strike were eligible for unemployment benefits. Gordon Chibroski/Staff Photographer

A lawyer representing the unions said Duddy’s ruling doesn’t comply with a 1985 state law that sought to balance employer and employee rights in a strike and discourage the use of replacement workers after union employees walk off the job.

“Today’s decision turns the statute on its head,” said the lawyer, Jeff Young.

Young said about half the workers on strike sought unemployment benefits and received them this summer after a hearing officer ruled that because FairPoint used replacement workers, it had not seen a “substantial curtailment of operations during the strike.” The hearing officer said any lost business suffered by FairPoint was due to using less experienced replacement workers and the winter’s harsh weather.

Under a 1985 law, Young said, that meant the striking workers were entitled to unemployment benefits and the 471 who had applied for compensation were paid this summer. The other strikers didn’t apply for compensation, he said.

The case cited in Duddy’s ruling – which did not include a name or other identifying information – said the worker would owe $6,176.

In her ruling, Duddy overturned the Labor Department hearing officer and said the company avoided a big drop in business by deciding, in the months leading up to the strike, to not take on work it might have been unable to complete if the workers walked out. In essence, the ruling said the company had planned for the strike by cutting back operations in advance of the walkout, and suffered a loss of business as a result. She also applied a less stringent standard for determining the impact of the strike on the company, saying she based her decision on a conclusion that FairPoint couldn’t maintain normal operations, rather than that it suffered a substantial loss of business.

Duddy said FairPoint “sharply curtailed their aggressive marketing efforts related to installations” before the strike, but after the workers had authorized a walkout and the contract expired in August 2014.

FairPoint did so “because they were unsure how much volume the company would be able to handle if a strike occurred” and didn’t want to alienate customers if they were unable to do the work, Duddy’s ruling said. FairPoint also told business customers about the possibility of a strike in September 2014, Duddy said, “and many customers chose to go with another provider as a result.”

Duddy said FairPoint documented that it only completed about half as many installations per month during the strike compared to the six months before the walkout and she attributed that to the company’s decision to curtail its operations before the walkout.

Duddy said the impact would have been much worse if FairPoint had not cut back on its marketing and said that was a wise decision to avoid sending unsatisfied customers to competitors.

“The employer understood that unhappy customers are bad for business,” she said.

Young said that reasoning means a company could manage its sales and service operations during the time leading up to a strike to show that it simply didn’t maintain normal operations, rather than that it sustained a “substantial curtailment” of business, thereby making employees ineligible for unemployment benefits.

“It’s a more business-friendly standard,” Young said, and “somewhat diabolical.”

Young said most states use the “substantial curtailment” standard rather than the one Duddy applied. The ruling, he said, allowed Duddy to avoid having to rule on the unions’ complaint that FairPoint hired hundreds of replacement workers.

Companies prefer to avoid having employees get unemployment compensation because it usually increases the amount of unemployment taxes the employers have to pay, Department of Labor spokeswoman Julie Rabinowitz said.

Further complicating the case is that Duddy, as chair of the commission, made the ruling herself. The seat for the employers’ representative on the three-member commission has been empty since March, leaving only Duddy and the labor representative on the panel.

State law allows the chair to make the rulings in such situations so an unbalanced panel isn’t deciding appeals, Rabinowitz said.

She said the seat has been unfilled because the commission is trying to make reforms that would lower costs and make the commission eligible to have the federal government pay more of the cost of handling appeals. She said one such reform is to pay commissioners a per-diem for their work on the commission rather than a salary.

The labor representative on the panel resigned Friday in a move that Rabinowitz said was planned weeks ago and unrelated to Duddy’s decision. Attempts to reach the commissioner, Vincent O’Malley, were unsuccessful Friday night.

The unions took pains Friday to suggest that the decision was politically motivated and pointed out that, two years ago, it was Duddy who ordered unemployment hearing officers to a lunch with Gov. Paul LePage, a move that some of the officers interpreted as an attempt to get them to issue more rulings in favor of employers.

LePage said he had concerns about inconsistent rulings, but a review by the federal Department of Labor said the meeting endangered the fair hearings process.

“I’m not surprised by the decision, given the source,” said Peter McLaughlin, the business manager for the International Brotherhood of Electrical Workers, one of the unions that walked out on FairPoint.

“In case anyone has forgotten, the chairwoman was appointed by Gov. LePage,” said Don Trementozzi, the president of a local of the Communications Workers of America, which also was part of the strike against the company.

Rabinowitz said commission rulings are confidential and she couldn’t comment on them. An attempt to contact Duddy through the commission office was redirected to Rabinowitz.

Rabinowitz also said she couldn’t comment on a bill the Labor Department submitted Sept. 25 titled, “An Act To Clarify Disqualification of Unemployment Benefits Regarding Stoppage of Work” and whether it was related to Duddy’s ruling.

She wouldn’t say if the content of the bill had been attached to the title and whether it was aimed at adopting the standard that Duddy used in the ruling as Maine law.

Young said the employees can either ask Duddy to reconsider her ruling or appeal to Kennebec County Superior Court and will do one or the other in the next few weeks. He said workers don’t have to repay the benefits while the appeal is pending.

Rabinowitz said that if the ruling stands, the workers who received benefits will receive a notice demanding repayment. She said the workers could ask the department to waive repayment or work out repayment plans.

FairPoint turned a $40.3 million profit in the second quarter this year, crediting the new contract that cut employee benefits. The profit surprised analysts who had expected a loss and it was only the second profitable quarter for the company since it emerged from bankruptcy in 2011.

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