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Operton v. Labor and Industry Review Commission

Court of Appeals of Wisconsin

April 14, 2016


         Submitted on Briefs February 23, 2016.

          APPEAL from an order of the circuit court for Dane County: JOHN C. ALBERT, Judge. Cir. Ct. No. 2014CV3050.

         On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Marilyn Townsend and Frederick B. Wade of Law Offices of Marilyn Townsend, Madison.

         On behalf of the defendant-respondent, the cause was submitted on the brief of William Sample of Labor and Industry Review Commission, Madison.

         Before Lundsten, Brennan and Reilly, JJ. LUNDSTEN, J. (concurring).


          REILLY, J.

          [¶1] In 2013, our legislature enacted an entirely new statutory ground for the denial of unemployment benefits: " substantial fault." We are presented in this case with an issue of first impression as to the statutory construction and application of " substantial fault" as that term is defined in Wis. Stat. § 108.04(5g)(a) (2013-14).[1] We set aside the decision of the Labor and Industry Review Commission (LIRC) as it erred in its construction and application of " substantial fault" to the facts presented.

         Statement of Facts

          [¶2] Lela Operton worked as a full-time service clerk for Walgreens from July 17, 2012 to March 24, 2014. As a service clerk, Operton averaged hundreds of cash handling transactions per day during her twenty months of full-time employment, or an estimated 80,000 transactions. Operton was well-liked by Walgreens, who described her work and demeanor as " conscientious," " always on time," " worked to the best of her ability," and willing to work on her days off. Operton participated in Walgreens' employee training and received information on Walgreens' policies and procedures,[2] which included training on processing Women, Infants, and Children (WIC) program checks. Operton acknowledged receipt of Walgreens' cash handling and WIC program check policies via the " New Hire Training Checklist." Operton was aware that employees faced " discipline" for failing to follow the training checklist.

          [¶3] Operton made eight " cash handling errors" during her twenty months with Walgreens:

First Violation: On October 19, 2012, Operton received a verbal warning for taking a WIC check for more items than the check authorized resulting in a $2.89 loss to Walgreens. Operton received a verbal and written warning that reiterated the proper procedures for taking WIC checks.
Second Violation: On February 12, 2013, Operton accepted a $14.46 WIC check without getting the customer's signature which made the check invalid.
Third Violation: On March 6, 2013, Operton handed a $16.73 WIC check back to the customer instead of retaining it for deposit. Operton received a written warning addressing the February 12 and March 6 cash handling errors, which outlined the proper procedure for accepting WIC checks and noted that " [f]urther failure to follow proper procedure will result in further disciplinary actions to include further write ups, suspension, and up to and including termination."
Fourth Violation: On July 24, 2013, Operton accepted a $27.63 WIC check before the valid date for which she received a " final" written warning that again reiterated proper WIC check handling procedures.
Fifth Violation: On January 1, 2014, Operton mishandled an $84.95 WIC check by inadvertently placing it in the customer's bag. Operton received another " final" written warning that included her supervisor's note that " [t]his is [Operton's] 4th issue with WIC checks. She is on a final written warning from July. Since these mistakes have been over a long period of time, [Operton] will be given one more chance."
Sixth Violation: On January 29, 2014, Operton accepted a $6.00 WIC check for a $6.17 purchase. Operton testified that the customer paid the 17 cents in cash. Operton received a " final" written warning together with a two-day suspension.
Seventh Violation: On March 18, 2014, Operton allowed a customer to leave the store before a $9.26 transaction was complete (PIN pad had not generated a receipt) and received another final written warning: " Any cash handling error, no matter the type, will lead to termination."
Eighth Violation: On March 22, 2014, Operton accepted a credit card for a $399.27 purchase without checking the customer's identification to verify the card belonged to the customer. The card was a stolen credit card. Operton was aware of Walgreens' requirement to check the identification when a credit card is presented for a purchase over $50.

          [¶4] Despite being well-liked and a conscientious employee, Walgreens terminated Operton's employment on March 24, 2014, for her repeated " cash handling errors" and " her failure to improve on them." Walgreens' disciplinary records indicate that it considered Operton's violations to be " cash handling errors" or " mistakes." Walgreens acknowledged that the cash handling errors were not intentional nor performed with any ill will on the part of Operton. Upon her discharge, her supervisor offered to serve as a reference. Operton's explanation for her errors was that she was having personal family issues during her time at Walgreens that left her homeless for a period of time during her employment.

          Operton filed for unemployment benefits. Walgreens objected to Operton's request for benefits claiming that Operton " was discharged for violation of a reasonable company policy regarding excessive cash discrepancies" which was as a result of her " incapacity to perform." The Department of Workforce Development (DWD) initially denied benefits on grounds of " misconduct." Operton appealed. An administrative law judge (ALJ) held an evidentiary hearing. The ALJ accepted Walgreens' evidence that Operton's mistakes were " errors." The ALJ found that Operton was aware of Walgreens' policies but continued to make " cash handling errors" after " receiving multiple warnings." According to the ALJ, Operton's " discharge was not for misconduct" as there was " no evidence that [Operton] intentionally or willfully disregarded the employer's interests by continuing to make cash handling errors." The ALJ also found that Operton's actions were not so careless or negligent as to manifest culpability or wrongful intent. The ALJ concluded that Operton was ineligible for unemployment benefits as her discharge was for " substantial fault" rather than for " misconduct." Operton appealed to LIRC.

          [¶6] LIRC affirmed the ALJ's decision and adopted the ALJ's decision as its own.[3] LIRC also made a finding not included within the ALJ's decision: Operton's March 22, 2014 failure to check the customer's identification was a " major infraction." LIRC did not explain why the error was a " major infraction." The circuit court affirmed LIRC.

         Unemployment Insurance

          [¶7] Prompted by concerns within the employer community that the current misconduct standard in Wisconsin was too generous in providing benefits to employees who should not qualify, the legislature, in 2013, enacted amendments to Wis. Stat. § 108.04(5) and (5g).[4] Scott Sussman, Department of Workforce Development, Analysis of Proposed UI Law Change Discharge for Employee's Substantial Fault (2012), . The amendments were expected to reduce benefit payments by approximately $19.2 million per year and increase the unemployment insurance trust fund, which had a deficit, by the same amount.[5] Id.

          [¶8] The legislature created a new two-tier standard for disqualifying claimants from receiving unemployment insurance benefits. The first tier is " misconduct" :

For purposes of this subsection, " misconduct" means one or more actions or conduct evincing such willful or wanton disregard of an employer's interests as is found in deliberate violations or disregard of standards of behavior which an employer has a right to expect of his or her employees, or in carelessness or negligence of such degree or recurrence as to manifest culpability, wrongful intent, or evil design of equal severity to such disregard, or to show an intentional and substantial disregard of an employer's interests, or an employee's duties and obligations to his or her employer.

Wis. Stat. § 108.04(5). The legislature enumerated seven specific employee actions that satisfy the misconduct standard, including drug and alcohol use, theft of an employer's property, conviction of a crime while on or off duty that affects the employee's ability to perform his or her job, threats or acts of harassment at work, excessive absenteeism or tardiness, falsifying business records, and willful or deliberate violation of a written and uniformly applied government standard or regulation. Sec. 108.04(5)(a)-(g).

          [¶9] The second tier is " substantial fault." Wis. Stat. § 108.04(5g)(a). Substantial fault did not exist as a ground for denial of benefits prior to 2014. See Wis. Stat. § 108.04(5)-(5g) (2011-12). The statutory definition for " substantial fault" is as follows:

For purposes of this paragraph, " substantial fault" includes those acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the employee's employer ....

Sec. 108.04(5g)(a). Unlike misconduct, in which the legislature expressly set forth specific employee actions that constituted " misconduct," the legislature set forth three acts or omissions by employees ...

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