DWD and LIRC continue to ignore court precedent on substantial fault

After the Supreme Court decision in Operton v. LIRC, 2017 WI 46, and an appeals court decision in Easterling v. LIRC, 2017 WI App 18, the Department of Workforce Development took no action to change its practices and follow these binding court decisions. Accordingly, parties needed to appeal their initial determinations in order to get unemployment law to be followed.

It is becoming apparent, however, that numerous appeals are now needed to get unemployment law to be followed whenever claimants are involved. Marilyn Townsend, Operton’s legal representative, just won an unemployment case in circuit court where DWD and the appeal tribunal not only continued to ignore Operton in an almost identical situation — namely a charge of several inadvertent errors by the employee — but the Labor and Industry Review Commission affirmed a finding of substantial fault by adding alleged warnings for which there was NO evidence in the record. As the circuit court judge explained (emphasis supplied):

The stated reasons for discharge were allegations that there were receiving issues on three separate dates in January of 2018. The store’s witness said he was only familiar with the incident that occurred on January 13th. The employer must prove the allegations upon which the discharge was based. Standing alone, this court does not believe that the January 13th incident [concerning a document mis-match between inventory and an invoice] is substantial evidence of substantial fault.

The plaintiff stated that she believed two pieces of paper merely stuck together and that is the reason the invoice was not scanned properly. She realized on the same day that an invoice could not be matched to the inventory and the [employer] witness (Ovsak) said she came to him and explained the problem. Apparently the problem was resolved when they received another invoice from the supplier on the following Monday.

There is no argument or claim that the plaintiff did anything intentionally wrong. In fact, she discovered her error and reported it to her supervisor. It appears that the incident was an inconvenience for the employer, but nothing more. The Commission agreed with the ALJ that the employee’s conduct did not rise to the level of an intentional and substantial disregard of the employer’s interest. There is no evidence that this single act was anything but an inadvertent error.

* * *

The Commission modified the decision to of the ALJ to fit the conclusion the ALJ wanted to reach. It decided that the January 13th incident, along with three prior coaching incidents during the second half of the fall of 2017, served as the reasons for discharge. Specifically, leaving a receiving door unlocked in August of 2017, an alleged incident of being belligerent and speaking with a raised voice on November 9th, and failing to accurately count some DVD’s on November 22th. The plaintiff says those earlier coachings are not relevant in determining whether the discharge after those coachings was for substantial fault where the employer has failed to prove the subsequent allegations that actually prompted the discharge.

The employer offered no proof at all of two of the three grounds alleged in the discharge document. While it offered proof that the January 13th, 2018 incident occurred, that act in the opinion of this court was not evidence of substantial fault. The Wisconsin Supreme Court has ruled that careless conduct does not equal substantial fault. Operton v. LIRC, 2017 WI 46, 375 Wis.2d 1.

The Commission relied on the prior coachings in 2017 as well as the January 13th incident to justify the finding of substantial fault. . . . the mere fact that [the Commission] did indicates that the Commission felt it necessary to essentially correct and bolster the findings of the ALJ in order to try and justify denying the plaintiff benefits.

Those prior coachings appear to be unrelated to the action on January 13th. They appear to be minor infractions and they did not lead to a dismissal standing on their own. The Commission cannot create evidence of substantial fault by adding the prior unrelated coachings to the January 13th incident.

So, now not only is DWD ignoring Operton, but administrative law judges at the Department’s hearing offices are also ignoring Operton. And, the Commission is also now ignoring Operton and seeking to get around Operton by adding arguments and connecting evidence in ways that the record obviously does not support.

The Department and the Commission are supposed to be NEUTRAL entities that are supposed to assess the evidence presented by employers to meet their heavy burden of persuasion in order to disqualify a claimant from receiving unemployment benefits when misconduct or substantial fault have occurred.

What this case illustrates is that the Department, the hearing offices, and the Commission are ignoring these obligations and instead looking to disqualify claimants on nothing more than whim and pretense, even when courts have directly told them otherwise.

Given the hundreds to thousands of people who apply for unemployment benefits every week in Wisconsin, it should in NO way require an attorney well-versed in the intricacies of unemployment law take an appeal into court simply so that unemployment law might be followed. An initial determination, a hearing before an administrative law judge, and an appeal to the Commission all failed in this case to follow clear and unmistakable black letter unemployment law.

An employee having to take up an appeal to circuit court and find an attorney for that appeal for the sake of simple justice in an unemployment case is in practical terms not possible for the hundreds and thousands seeking unemployment benefits every week of the year in Wisconsin. Something is fundamentally wrong when claimants have to go to such lengths simply to get the unemployment benefits due them if the law had been followed in the first place.

Note: Links to the appeal tribunal and LIRC decisions will be added.

Operton oral argument

Today, the Wisconsin Supreme Court held oral argument in Operton about whether substantial fault disqualifies employees from receiving unemployment benefits because of their inadvertent mistakes and what standard of deferral courts owe the Labor and Industry Review Commission in deciding unemployment cases.

Substantial fault is defined in Wis. Stat. § 108.04(5g)(a) as:

those acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the job but shall not include:

1. Minor infractions of rules unless such infractions are repeated after a warning was received by the employee,
2. inadvertent mistakes made by the employee, nor
3. Failures to perform work because of insufficient skill, ability, or equipment.

The history of this provision is described in an amicus brief I filed on behalf of the Wisconsin Employment Lawyers Association. Basically, the Unemployment Insurance Advisory Council had rejected this change in unemployment law, but the Department worked with the Joint Finance Committee to add this provision to the 2013 budget bill.

Prior to Operton, the Commission had held that substantial fault equals negligence and that the only way to avoid disqualification for a work-related mistake was for the claimant to demonstrate he or she lacked the skills or equipment to do the required work or that there was no prior warning from the employer about avoiding the mistake at issue. The claimant in Operton failed to meet this standard, according to the Commission, because her few cash-handling mistakes (eight over 20 months of employment) occurred after a warning and were not because of a lack of skill, ability, or equipment. Whether these errors qualified as inadvertent or not was never specifically addressed. The appeals court in Operton addressed exactly what is meant by an inadvertent mistake in the statute by holding that: (1) some kind of employee intent behind the mistakes at issue was necessary to show that the mistakes were more than inadvertent and (2) employer warnings did not automatically transform an inadvertent mistake into an intentional act.

Because the claimant won at the appeals court, argument started with counsel for the Commission, William Sherlin Sample. He began with an explanation about the Commission’s dispute with the appeals court over how the Commission’s prior misconduct decisions should be addressed. After a few comments or queries from the justices, that was all that was said directly about the deferral question. The rest of the oral argument featured questions about what the substantial fault disqualification meant and how to apply it.

Chief Justice Roggensack wanted to know whether the appeal tribunal held that there was no inadvertent error because the claimant was aware of the employer’s cash handling policies. In other words, did an inadvertent error turn on a lack of awareness of the employer’s job requirements? The appeal tribunal had stated:

[Operton] was aware of the employer’s policies, including the cash handling and WIC check procedures, but continued to make cash handling errors resulting in actual financial loss to the employer, after receiving multiple warnings. The record does not establish that the employee lacked the ability or skill to perform her work. As such, this appeal tribunal must find that her discharge was for substantial fault connected with her employment

The Commission disagreed with this equivalency. Simple awareness of an employer policy went to whether the employer’s job requirements were reasonable and did not address whether the actual on-the-job error was inadvertent or not.

NOTE: Indeed, to do otherwise would essentially mean that inadvertent mistakes on the job only occur when employees have no knowledge of what is required of them. It would essentially limit inadvertent errors to unreasonable job requirements and call into question why the provision for inadvertent errors existed in the first place.

In framing this question this way, Roggensack was essentially making the awareness of a rule the same as an intent to violate that rule. Awareness of an employer policy is not the same as being aware of the errors as they occur, however. Someone running a register that comes up short, for instance, may know that she should not come up short at the end of the day. But, the short register by itself does not indicate she had an intent to steal from the employer. There needs to be evidence that her intentional or grossly negligent actions were responsible for the register shortage. By equating mistake in this way with following an employer requirement, Roggensack is essentially doing what the Department has done with unemployment concealment.

Sample also explained to the justices that there was no express finding by the appeal tribunal or the Commission that the errors in question were NOT inadvertent errors. And, that explanation dovetailed with an issue that threaded through the oral argument: whether a finding that an employee’s mistake was inadvertent or not qualified as a finding of fact or a legal finding. For the Commission, this finding was strictly factual because it only touched on the “intent” of the employee when making the mistakes in question. As noted below, the justices had a different take.

Justice Kelly asked Sample about the relationship between unintentional mistakes for misconduct purposes versus inadvertent mistakes for substantial fault. While the dictionary definitions of inadvertent and unintentional rely on each other, Sample explained, the number of warnings Operton received transformed her mistakes from unintentional to intentional.

Justice Ann Bradley then tipped her hand and pointed out that Sample was making the same claim here that the court of appeals had rejected in its decision: namely that the Commission was merging the inadvertent errors provision with the infractions repeated after warning provision. For the Commission, this analysis by the appeals court did not apply because each successive warning to Operton made a claim of inadvertence less and less credible. Whereas the appeals court did not see any evidence of intent or willfulness by the employee in the appeal tribunal or Commission decision, Sample demurred, there was in actuality such evidence because a finding of no intent for misconduct purposes was NOT the same as a finding of unintentional conduct for the purposes of substantial fault.

Justice Gableman asked whether the number of errors can establish intent. Sample answered that such matters were handled on a case-by-case basis and that in Operton the “intent” in question arose from the series of errors the employee made.

Chief Justice Roggensack then pointed out that it appeared that the Commission was determining whether or not certain facts met a particular legal standard. During rebuttal, Sample again explained that there was no specific analysis of the errors as inadvertent and, that if such analysis was needed, a remand for additional evidence would be appropriate. Justice Abrahamson observed that when the facts are not in dispute — as in this case — the issue is usually whether those facts satisfy a particular legal standard. Where the facts are in dispute, she added, then the court is confronted with a mixed question of fact and law.

Marilyn Townsend represented Operton. After describing how unemployment benefits helped businesses, communities, and workers, Townsend faced questions from Justice Kelly about how to apply substantial fault. Did each mistake have to be analyzed in isolation or should they be examined as a group, he asked. Townsend answered both types of analysis could be applied, depending on the circumstances of each case. And, in Operton’s situation, she reported, each single mistake had to be examined separately from the others because of the amount of time between the mistakes and the distinct nature of the mistakes. The question was largely academic, however, as Townsend pointed out that the Commission never did an inadvertent error analysis for any of the eight errors in question.

Chief Justice Roggensack then returned to her earlier proposition concerning the portion of the appeal tribunal decision quoted above: should an awareness of a policy mean that the mistakes in violation of that policy constitute the required intent?

NOTE: Neither the parties nor the court addressed the issue that there can be degrees of intent. At present, the Commission generally requires a much higher level of intent for a finding of misconduct than it does in substantial fault cases. And, in Operton’s case, it is clear from the appeal tribunal decision and the briefing that she was unaware of the errors as they were being made. That is why the errors were inadvertent.

Justice Abrahamson asked Townsend which holding she preferred: the main holding in Operton or the holding by Justice Lundsten in his concurrence in which he observed that misconduct and substantial fault have important differences around the number of acts at issue and that each act has to be analyzed to determine whether it is something more than inadvertent. Townsend responded that, if forced to choose, she preferred the analysis in the concurrence.

Townsend also agreed with Chief Justice Roggensack that a temporal component had to be applied to each error at issue in the case.

NOTE: That is, each error had to be examined relative to other errors and what else was happening in the workplace in general.

Near the end of the oral argument, Justice Gableman observed that perhaps the case was about infractions and not inadvertent errors at all. In response, Justice Abrahamson posited that any of the three caveats to substantial fault could apply, and it was up the employee simply to show that he or she qualified for unemployment benefits under one of these three provisions.

NOTE: Gableman’s observation missed the distinction between an infraction and inadvertent error over which the appeals court hinged its decision. Infractions are acts over which a person has some control, like whether to call in when late to work, whereas inadvertent errors are accidental mistakes over which a person has no control, such as mis-dialing a phone number. Abrahamson’s response was also somewhat misleading, as it presumed that employees have to establish their eligibility for unemployment benefits rather than the employer demonstrating a disqualification.

Overall, the parties and the justices were effective in getting their points across. Probably the earliest for a decision is April 2017, and there should be a decision no later than June of next year.

“Substantial” changes to substantial fault

Last week, the Appeals Court issued a decision in Operton v. LIRC that significantly changes how the Labor and Industry Review Commission and the Department of Workforce Development have been applying the substantial fault disqualification put into affect in 2014 by the Legislature over the rejection of the Advisory Council.

The Commission had previously held that substantial fault equals negligence and that the only way to avoid disqualification for a work-related mistake was for the claimant to demonstrate he or she lacked the skills or equipment to do the required work or that there was no prior warning from the employer about avoiding the mistake at issue. Operton significantly changes what employees need to show about their alleged lack of skills or whether their mistakes were inadvertent or not.

The case arose from a Madison unemployment clinic client that Marilyn Townsend took on. She and her partner, Fred Wade, made a crafty, inside attack into what substantial fault means and broke it apart from within. The appeals court held in Operton that: (1) some kind of employee intent behind the mistakes at issue were necessary to show that the mistakes were more than inadvertent and (2) employer warnings did not automatically transform an inadvertent mistake into an intentional act. As a result, accidental qua inadvertent actions should not disqualify claimants any more.

NOTE: Accidents that cause substantial damage to an employer’s property, however, can still qualify as misconduct under another change passed by the legislature over the rejection of that change by the Advisory Council. See Hamson v. Ozark Motion Lines, UI Hearing No. 14004168MD (5 March 2015).

As noted previously, substantial fault led to sharp decline in benefit payments. Given how important unemployment benefits are to those who need to pay rent and buy food, this decision should have a significant impact for many. But, that impact might only play out for those realizing they need to appeal initial denials of their benefit claims. As has emerged with how the Department applied concealment law the past several years, the Department will simply ignore legal precedents with which it disagrees and then re-write the law to match the outcome it desired.

UPDATE (19 Sept. 2016): After numerous legislators wrote the Advisory Council in a letter dated 1 April 2013 containing 33 proposed changes to unemployment law, the Department drafted a table detailing these proposals relative to the Department proposals that the council had before it already. See also “Advisory Council Meeting — 18 April 2013” (describing events of the April 18th Advisory Council meeting and linking to certain documents relevant to this meeting, including the April 1st letter and the DWD table). In this table, the Department projects missed savings of $17 million through the substantial fault and new misconduct disqualifications that the Advisory Council had declined to adopt. No explanation is available regarding why this amount differs from the earlier $19.2 million figure in the February 2013 version of D12-01. As indicated here, the financial impact of substantial fault has actually been much greater: between $67 to $64 million.