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 alsoAdvisory 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.