Beres/absenteeism at the Wisconsin Supreme Court, Part 1

I previously described an Appeals Court decision in DWD v. LIRC (Beres), 2017 WI App 29, 375 Wis.2d 183, 895 N.W.2d 77, where the Department argued that a new definition of absenteeism qua misconduct allowed an employer unilaterally to determine a claimant’s eligibility for unemployment benefits by setting an employer that disqualified an employee for a single absence. In a 2-1 decision, the Court of Appeals concluded that such an outcome contradicted the entire point of unemployment law and sided with the Commission that the employer cannot define for itself what absenteeism will constitute misconduct.

The Department subsequently asked the Wisconsin Supreme Court to get involved, and the state court accepted the invitation. Furthermore, the justices added this case to their push to re-examine the deference given administrative agencies.

In Operton v. LIRC, 2017 WI 46, 375 Wis.2d 1, 894 N.W.2d 426, three justices issued a concurrence calling into question whether judicial deference to administrative agencies violated the constitutionally-mandated separation of powers among the three branches of government.

In Beres and two other cases — TetraTech v. DOR, Appeal No. 2015AP2019, and Wisconsin Bell, Inc. v LIRC, Appeal No. 2016AP355 — the Wisconsin Supreme Court has decided to address the following question:

Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?

This question represents a RADICAL restructuring of jurisprudence that could essentially transform state court judges into super-legislators whose own preferences and desires supplant the reasoning and knowledge of state agencies and even their expert opinions and information-gathering. As such, this change is so fundamental that it requires its own separate, post to describe.

What first needs to be done, however, is to describe the statutory framework of the unemployment law at issue in Beres so that we at least have some idea of how we are getting to this fundamental re-thinking of administrative law in general.

Absenteeism as misconduct

At issue in Beres is the following absenteeism and tardiness provision in Wis. Stat. § 108.04(5)(e):

(e) Absenteeism by an employee on more than 2 occasions within the 120 day period before the date of the employee’s termination, unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature, or excessive tardiness by an employee in violation of a policy of the employer that has been communicated to the employee, if the employee does not provide to his or her employer both notice and one or more valid reasons for the absenteeism or tardiness.

This change in unemployment law began at the 29 November 2012 meeting of the Unemployment Insurance Advisory Council when the Department, on its own initiative, dropped more than a dozen substantive changes to unemployment law. See this post for the memo that originally describes all of these changes. Proposal D12-01 included numerous changes to disqualification standards, including the elimination of the absenteeism and tardy provisions in Wis. Stat. § 108.04(5g) by adding a new disqualification called “substantial fault” and the addition of a new, specific absenteeism provision that would qualify as misconduct. This proposed absenteeism and tardiness qua misconduct provision in Proposal D12-01 stated:

Excessive absenteeism or tardiness in violation of a known company policy and the individual does not provide to the employer both notice and a valid reason or reasons for the absence or tardiness.

See D12-01 at 3.

At the 1 April 2013 meeting of the Advisory Council, the Advisory Council rejected the proposed substantial fault provision and made some changes to the absenteeism and tardiness thresholds set forth in Wis. Stat. § 108.04(5g) for triggering a disqualification. The specific changes, however, were not announced to the public.

NOTE: The minutes of the 1 April 2013 meeting of the Advisory Council only state the following:

(A) Department Proposal D12-01 (Misconduct Standard) the Council supported this Department proposal with modifications. The Council agreement enumerated within the statute the standard taken from the Wisconsin Supreme Court decision of Boynton Cab and amended the proposal to solely provide four examples of conduct that would qualify as misconduct, but not limit misconduct to these four examples. The four examples relate to employee conduct concerning:

  1. Illegal Use of Drugs and Use of Alcohol While on the Job;
  2. Larceny;
  3. Crimes Related to the Job; and,
  4. Violations that would lead to Fines or License Suspension of the Employer.

The Council also agreed to amend the language of section 108.04(5g) of the Wisconsin Statutes with respect to absenteeism and tardiness to make it easier for either reason to disqualify a claimant from benefits.

After the meeting ended, I asked Robert Andersen if he could send me a copy of what the Advisory Council had specifically agreed on.

NOTE: Robert Andersen, worked with the members of the Advisory Council’s labor caucus during non-public discussion of proposed changes to unemployment law, and he helped facilitate agreement between the labor and management caucuses.

On 2 April 2013, I received an e-mail message from Mr. Andersen that contained the specific provisions agreed upon by the Advisory Council in an attachment. That attachment indicates that the Advisory Council agreed to to amend sub-section (5g) in the following manner:

(5g) DISCHARGE FOR FAILURE TO NOTIFY EMPLOYER OF ABSENTEEISM OR TARDINESS. (a) If an employee is discharged for failing to notify his or her employer of absenteeism or tardiness that becomes excessive, and the employer has complied with the requirements of par. (d) with respect to that employee, the employee is ineligible to receive benefits until 6 weeks have elapsed since the end of the week in which the discharge occurs and the employee earns wages after the week in which the discharge occurs equal to at least 6 times the employee’s weekly benefit rate under s. 108.05 (1) in employment or other work covered by the unemployment insurance law of any state or the federal government. For purposes of requalification, the employee’s weekly benefit rate shall be the rate that would have been paid had the discharge not occurred.

(b) For purposes of this subsection, tardiness becomes excessive if an employee is late for 6 4 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(c) For purposes of this subsection, absenteeism becomes excessive if an employee is absent for 5 2 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(d) 1. The requalifying requirements under par. (a) apply only if the employer has a written policy on notification of tardiness or absences that:

a. Defines what constitutes a single occurrence of tardiness or absenteeism;

b. Describes the process for providing adequate notice of tardiness or absence, and, regarding tardiness, which gives the employee a reasonable time for providing notice and which at least allows the employee the opportunity to provide notice as soon as practically possible; and

c. Notifies the employee that failure to provide adequate notice of an absence or tardiness may lead to discharge.

2. The employer shall provide a copy of the written policy under subd. 1. to each employee and shall have written evidence that the employee received a copy of that policy.

3. The employer must have given the employee at least one warning concerning the employee’s violation of the employer’s written policy under subd. 1. within the 12 month period preceding the date of the discharge.

4. The employer must apply the written policy under subd. 1. uniformly to all employees of the employer.

This memorandum does not appear in the Department’s supportive materials for Beres, however.

Janell Knutsen is the director of the Bureau of Legal Affairs for the Department’s Unemployment Division and serves as the non-voting chair of the Advisory Council. In her affidavit included in the record in this matter, Ms. Knutsen states:

12. The April 1, 2013 resolution recommending legislative change to the absence and tardiness statute was the only action by the UIAC on a proposal to change the disqualification for absence or tardiness during my tenure as UIAC Chair. I do not find in the Minutes of the April 1, 2013 UIAC meeting or in the Minutes of subsequent meetings in 2013 any other or additional recommendations or other action of the UIAC regarding disqualification for absence and tardiness. A copy of the five-page Minutes of the April 1, 2013 meeting of the UIAC is attached to this affidavit and identified as Exhibit 4. The attached minutes were formally approved by unanimous vote of the UIAC members at the April 18, 2013 UIAC meeting.

* * *

16. As the UIAC files show, there is no evidence in the UIAC files regarding the development of the language that became Wis. Stat. § 108.04(5)(e) and no evidence of involvement of the UIAC in the choice of words by the Legislature in its enactment of Wis. Stat. § 108.04(5)(e), except as generally reflected in the UIAC resolution of April 1, 2013, that stated “The Council also agreed to amend the language of section 108.04(5g) of the Wisconsin statutes with respect to absenteeism and tardiness to make it easier for either reason to disqualify a claimant for benefits.”

R.18-4 and 18-5. Ms. Knutsen also states in ¶15 of her affidavit (R.18-5) that she and Department staff searched Department records for “all written materials in those files relating to the action that the UIAC took to recommend changes to the unemployment law regarding disqualification for absenteeism and tardiness” and that she believes she has “identified in this Affidavit all such materials in the UIAC files.”

Michael Duchek is a legislative attorney at the Wisconsin Legislative Reference Bureau who was directly involved in drafting unemployment legislation in 2013. In his affidavit, part 1 included in the record in this matter, Mr. Duchek states:

10. I understand that the Unemployment Insurance Advisory Council considered the D12-01 proposal (Exhibit 7) and that on April 1,2013 the Advisory Council voted to recommend to the Legislature amendments to Wis. Stat. §§ 108.04(5) and (5g), although the Council’s recommendation departed from the statutory language that the Department had proposed in its D12-01 proposal.

11. The language that LRB incorporated in draft bills to amend Wis. Stat. §§ 108.04 (5) and (5g), although similar in general to D12-01 and the recommendation of the Council, was developed by LRB in consultation with the legislative requestor and did not match the amendments which were recommended to the Legislature by the Council.

12. It is evident from the proposals by the Department and the Council that each of them was drafted to strengthen the disqualification provisions related to misconduct, absenteeism and tardiness. The same is true of Wis. Stat. § 108.04(5)(e) and the other misconduct provisions as drafted by LRB and enacted in Act 20, although the enacted provisions went further to achieve this objective than did the Department and Council proposals.

R.19-3. Mr. Duchek indicates in ¶18 of his affidavit that his first draft of a new absenteeism and tardiness qua misconduct disqualification occurred on 13 May 2013. R.19-5. As indicated throughout the supporting materials attached to Mr. Duchek’s affidavit, this language was drafted at the request of Rep. Knodl and his legislative assistant, BJ Dernbach. See also the available drafting requests.

There is no indication in Mr. Duchek’s affidavit or in the 800+ pages of supporting materials that any action was undertaken to enact the changes to Wis. Stat. § 108.04(5g) approved by the Advisory Council (fyi, part 2 of Mr. Duchek’s affidavit is also available).

The Department bill that purportedly set forth what the Advisory Council had proposed was introduced as 2013 SB200. That bill did NOT include any of the recommended disqualification changes to the misconduct or quit provisions of unemployment law approved by the Advisory Council. When the first public hearing for 2013 SB200 was under way on 29 May 2013, the Joint Finance Committee also met that day in regards to the budget bill at issue then, 2013 AB40. At that meeting, the Joint Finance Committee introduced an amendment via Motion #506 to 2013 AB40. Motion #506 included the absenteeism language Mr. Duchek had drafted. See ¶¶23 and 24 of Mr. Duchek’s affidavit, R.19-7, and R.19-14 to 19-27 for a copy of Motion #506; see also Advisory Council — 2 May 2013 meeting — and legislative actions today (29 May 2013).

As evident in her affidavit, Ms. Knutson has studiously avoided any mention or description of the actual language the Advisory Council specifically had adopted in regards to new absenteeism and tardiness disqualification thresholds in Wis. Stat. §108.04(5g).

Neither affidavit by Mr. Duchek or Ms. Knutsen indicate how and why the clause “unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature” was added to the draft legislation, as this clause was NOT part of: (1) the original Department proposal, (2) what the Advisory Council adopted, or (3) the 1 April 2013 letter and proposals from legislators featured prominently in Ms. Knutsen’s affidavit at ¶¶10-11, R.18-3 to 18-4, and also noted in Mr. Duchek’s affidavit at ¶¶7, 8, and 10 (the legislator’s letter is available in the record at 18-23 to 18-36 and in partial form at 19-35 to 19-46).

In contrast to Ms. Knutson’s statements omitting the existence of any specific absenteeism proposals by the Advisory Council, Mr. Duchek’s affidavit provides evidence that the Advisory Council’s specific proposals existed, were circulated beyond the Advisory Council, and indeed were reviewed by Mr. Duchek himself. Mr. Duchek states that the “Council’s recommendation departed from the statutory language that the Department had proposed” and also that the Legislative Reference Bureau’s draft bill that would become Wis. Stat. § 108.04(5)(e) “did not match the amendments which were recommended to the Legislature by the Council.” Ducheck Aff. at ¶¶10-11.

Mr. Ducheck also states in his affidavit that it is “evident from the proposals by the Department and the Council that each of them was drafted to strengthen the disqualification provisions.” Ducheck Aff. at ¶12. While the Advisory Council’s April 1st proposal did make it easier to disqualify claimants, nowhere in the Advisory Council’s proposal were employers given the unilateral power to determine employees’ eligibility for benefits via employer policies.

Finally, neither Ms. Knutsen nor Mr. Duchek explain how the Advisory Council’s threshold for absenteeism of “2 or more scheduled workdays” became “more than 2” absences in the enacted legislation. In other words, the three absences in 120 days provision that was enacted is less strict than what the Advisory Council had adopted and includes a number that was completely absent from the original Department proposal.

What next?

Today, December 1st, is scheduled for oral arguments in Beres, TetraTech, and Wisconsin Bell.

This legislative history for the absenteeism changes in unemployment law will probably NOT come up, however. This legislative history has not been part of the Wisconsin Supreme Court briefing, and the acclaimed focus of judges on the statutory text does not seem to hold much water in comparison to the policy issues at stake in such legislation. Indeed, what has featured prominently in the briefing is the marker laid down in Operton about agency deference and the ability/responsibility of judges to determine on their own constitutional initiative the reasonableness of what administrative agencies decide.

So, in follow-up posts I will delve into this question of agency deference, and I will attempt to explain what happened in oral arguments today in these three cases.

But, the complete mess of the statutory text at issue in Beres should matter, especially when that statutory text will likely serve as a vehicle for probably proclaiming how administrative agencies cannot provide, according to newly empowered judges, rationale applications of that statutory text. For these judges (as the Department of Justice claimed in its briefing), the Commission is being accused of not transforming a nonsensical absenteeism disqualification into something rational, let alone provide an interpretation that is so reasonable that no judge could ever disagree with it. In short, a **ed-up statute is being used as the vehicle for requiring administrative agencies to provide explanations for their interpretations that survive heightened scrutiny.

Advertisements

Absenteeism decision excludes zero-tolerance policy as misconduct

Today’s appeals court decision in DWD v. LIRC (hereafter referred to as Beres), Appeal No. 2016-AP-1365 (recommended for publication) holds that an employer’s absenteeism policy of one discharge in the first 90 days of a probationary period does NOT qualify as per se misconduct.

In this case, the employee landed a job at a nursing home. Flu-like symptoms, however, led her to miss work, and the employer let her go because she missed a day of work during her 90-day probationary period. When the employee filed a claim for unemployment benefits, the Department found misconduct because she violated the employer’s zero-tolerance absenteeism policy. Per Wis. Stat. § 108.04(5)(e) (emphasis supplied):

Absenteeism by an employee on more than 2 occasions within the 120-day period before the date of the employee’s termination, unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature . . .

The Department has concluded that this italicized portion of this statute allows employers to decide for themselves how many absences will constitute misconduct for unemployment purposes.

NOTE: This position is a stunning development in contradiction of the rest of unemployment law that presumes employee eligibility for unemployment benefits and establishes the economic importance of unemployment benefits for addressing macro-economic issues in the state’s economy. The Department’s stance means that employers gain the unilateral ability under this provision to determine for themselves when an employee commits misconduct for unemployment purposes.

The Commission reversed, holding that the more than two absences in 120 days provisions without notice sets a floor for a finding of misconduct. The employee was not responsible for her illness, the Commission noted, and so she missed work through no fault of her own — the classic formulation about when employees are eligible for unemployment benefits.

After a circuit court over-turned the Commission’s decision and agreed with the Department, the Commission appealed the case to the appeals court. The appeals court agreed with the Commission that its interpretation of Wis. Stat. § 108.04(5)(e) was more reasonable than the Department’s. The appeals court in Beres at ¶¶18-20 explained:

The purpose of unemployment insurance benefits is to serve as a bridge for employees from one job to the next or “to cushion the effect of unemployment,” absent “actions or conduct evincing such willful or wanton disregard of an employer’s interests.” Wis. Stat. § 108.04(5); Boynton Cab, 237 Wis. at 258-59.

An example illustrates the reasonableness of LIRC’s interpretation that Beres’ actions did not rise to the level to deny benefits. Assume Beres was found to be in a tavern during her scheduled shift and, when called, lied about being sick. At the opposite end of the spectrum, assume that Beres was involved in a serious car accident within two hours of the start of her shift due to no fault of her own and required hospitalization. In both of these examples, Beres would be in violation of [the employer’s] attendance policy. LIRC’s interpretation of Wis. Stat. § 108.04(5) and (5)(e) allows an examination of the employee’s conduct in relation to both the employer’s policy as well as the policy that unemployment benefits should only be denied if the employee engages in actions constituting misconduct or substantial fault. The first example would likely qualify as misconduct under both § 108.04(5) and [the employer’s] written attendance policy, whereas the second example is a technical violation of [the employer’s] attendance policy, but is not an act of misconduct or substantial fault.

Employers are free to adopt a “zero-tolerance” attendance policy and discharge employees for that reason, but not every discharge qualifies as misconduct for unemployment insurance purposes. As our supreme court explained, “The principle that violation of a valid work rule may justify discharge but at the same time may not amount to statutory ‘misconduct’ for unemployment compensation purposes has been repeatedly recognized by this court.” Casey, 71 Wis.2d at 819-20. Similarly, this court found in Operton that employers have “the right to have high expectations of its employees and also [have] the right to discharge an employee for not meeting their expectations,” but we concluded that high expectations were insufficient to deny unemployment benefits. See Operton, 369 Wis.2d 166, ¶31.

A few additional comments about this decision are warranted. First, the appeals court gets the legislative history of this new absenteeism provision wrong. In Beres at ¶2, the appeals court describes the history this way:

Prompted by concerns within the employer community that eligibility for unemployment benefits was too generous, the legislature, in 2013, made wholesale changes to the unemployment benefit law, including modifying the absenteeism ineligibility criteria from “5 or more” absences without notice in a twelve-month period to “more than 2” absences without notice in a 120-day period, “unless otherwise specified by his or her employer in an employment manual.Compare Wis. Stat. § 108.04(5g)(c) (2011-12), with § 108.04(5)(e) (emphasis added). It is this final clause that is at the heart of the dispute.

In actuality, the concerns prompted by the employer community were only what the Department noted when it — on its own initiative — originated an extensive re-write of unemployment law. See D12-01. The Advisory Council actually rejected these proposed changes and instead put forward the following changes to the then existing absenteeism provisions in Wis. Stat. § 108.05(5g):

“(5g) DISCHARGE FOR FAILURE TO NOTIFY EMPLOYER OF ABSENTEEISM OR TARDINESS.

(a) If an employee is discharged for failing to notify his or her employer of absenteeism or tardiness that becomes excessive, and the employer has complied with the requirements of par. (d) with respect to that employee, the employee is ineligible to receive benefits until 6 weeks have elapsed since the end of the week in which the discharge occurs and the employee earns wages after the week in which the discharge occurs equal to at least 6 times the employee’s weekly benefit rate under s. 108.05 (1) in employment or other work covered by the unemployment insurance law of any state or the federal government. For purposes of requalification, the employee’s weekly benefit rate shall be the rate that would have been paid had the discharge not occurred.

(b) For purposes of this subsection, tardiness becomes excessive if an employee is late for 6 4 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(c) For purposes of this subsection, absenteeism becomes excessive if an employee is absent for 5 2 or more scheduled workdays in the 12-month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(d) 1. The requalifying requirements under par. (a) apply only if the employer has a written policy on notification of tardiness or absences that:

a. Defines what constitutes a single occurrence of tardiness or absenteeism;

b. Describes the process for providing adequate notice of tardiness or absence, and, regarding tardiness, which gives the employee a reasonable time for providing notice and which at least allows the employee the opportunity to provide notice as soon as practically possible; and

c. Notifies the employee that failure to provide adequate notice of an absence or tardiness may lead to discharge.

2. The employer shall provide a copy of the written policy under subd. 1. to each employee and shall have written evidence that the employee received a copy of that policy.

3. The employer must have given the employee at least one warning concerning the employee’s violation of the employer’s written policy under subd. 1. within the 12 month period preceding the date of the discharge.

4. The employer must apply the written policy under subd. 1. uniformly to all employees of the employer.

(e) The department shall charge to the fund’s balancing account the cost of any benefits paid to an employee that are otherwise chargeable to the account of an employer that is subject to the contribution requirements under ss. 108.17 and 108.18 if the employee is discharged by that employer and par. (a) applies.

(em) If an employee is not disqualified under this subsection, the employee may nevertheless be subject to the disqualification under sub. (5). [general misconduct law]

As obvious, this proposal is not what ended up being enacted. SeeAdvisory Council Meeting — 1 April 2013” (council declined to adopt proposed substantial fault standard but recommended adding various examples of misconduct). The Department, however, never acted on the Advisory Council’s recommendations. Instead, on 29 May 2013 the Joint Finance Committee added the rejected substantial fault and misconduct standards to the budget bill that eventually became 2013 Wis Act 20. SeeAdvisory Council — 2 May 2013 meeting — and legislative actions today” and “JFC UI amendments” (JFC motion to amend budget bill included various unemployment financing provisions and rejected substantial fault, misconduct, and quit provisions; DWD drafted bills that eventually became 2013 Wis. Act 36 never included the Advisory Council’s agreed-upon misconduct and quit proposals). Accordingly, these changes to unemployment law went against the express recommendations of the Advisory Council.

Second, the appeals court reaches its holding with either a de novo or due weight standard of deference. Beres at n.5. The proposed elimination of LIRC will likely mean that the Department replaces the Commission to whom courts defer on unemployment matters.

Third, a dissent in Beres at ¶¶22-31 essentially accepts the Department’s position that employers get to enact their own misconduct standards per this new absenteeism provision.

Given this dissent and how this argument, if accepted, essentially would undo unemployment eligibility in Wisconsin, a certiorari petition from the Department to the Wisconsin Supreme Court is likely, and I suspect such a petition will be accepted.