In a landmark decision for the Kentucky business community, the Kentucky Court of Appeals has forbidden the common practice of a nonlawyer employee representing the business in unemployment insurance challenges.

KRS 341.470(3)(a) provides that “any employer in any proceeding before a referee or the commission may represent himself or may be represented by counsel or other agent duly authorized by such employer.” (Emphasis added.) Pursuant to this statute, a business will often designate an employee to represent it before the Kentucky Unemployment Insurance Commission and its Unemployment Division. This practice saves the business legal fees.

Today, the Court of Appeals held this practice is impermissible because the statute encroaches upon the separation of powers enshrined in the Kentucky Constitution. In other words, the Court of Appeals held that the General Assembly does not have the constitutional authority to pass legislation governing the practice of law because that power is given to the Kentucky Supreme Court.

Section 116 of the Kentucky Constitution provides: “The Supreme Court shall have the power to prescribe rules governing its appellate jurisdiction, rules for the appointment of commissioners and other court personnel, and rules of practice and procedure for the Court of Justice. The Supreme Court shall, by rule, govern admission to the bar and the discipline of members of the bar.”

Through its rulemaking power, the Kentucky Supreme Court has promulgated a rule defining the practice of law as “any service rendered involving legal knowledge or legal advice, whether of representation, counsel or advocacy in or out of court, rendered in respect to the rights, duties, obligations, liabilities, or business relations of one requiring the services.” SCR 3.020. Only a lawyer may practice law in Kentucky. See, e.g., SCR 3.022. In a previous case, the Supreme Court held that nonlawyers may not represent a person before the Kentucky Department of Worker’s Claims in workers’ compensation matters. See Turner v. Ky. Bar Ass’n, 980 S.W.2d 560 (Ky. 1998). The Court of Appeals held that today’s decision is a logical extension of Turner.

The Court of Appeals did clarify that its holding would not apply to “individual employers, such as a sole proprietorship” because they “have the right to represent themselves in any administrative or legal proceeding.” The court also held that its decision applies prospectively only, meaning that past cases are not affected.

The case is Nichols v. Kentucky Unemployment Insurance Commission, No. 2017-CA-1156. I anticipate that the commission, Norton Healthcare, or both will ask the Supreme Court to review the case, and the business community may want to support them in their request by filing amicus briefs, also known as “friend of the court” briefs. Perhaps their best argument is that Section 116 gives the Supreme Court authority over “rules of practice and procedure for the Court of Justice.” State administrative agencies such as the Kentucky Unemployment Insurance Commission are not part of the Court of Justice, but rather the executive branch of state government.