Friday, April 1, 2011

Why Do Employers Lose So Many “Discharge For Misconduct” Cases

Employers often lose “discharge for misconduct” cases at the Employment Development Department (EDD) and at the California Unemployment Insurance Appeals Board (CUIAB). The following is a discussion of the steps an employer can take to increase the chances of prevailing in these types of cases.

What is at Stake?
An employer’s EDD tax rate can vary from 1.2 to 6.2%, depending upon the number of employees and the number of claims paid from the employer’s reserve account in Sacramento. Therefore, doing a good job in defeating an unemployment insurance claim can save a company a lot of money, in the long run.

How Does the Law Define Employee “Misconduct”?
Misconduct connected with an employee's work consists of four elements:

• A material duty owed by the claimant/employee to the employer in the employment contract, whether oral or written;
• A substantial breach of that duty;
• A willful or wanton breach or disregard of that duty; and
• A “disregard of employer's interests”; i.e., that which tends to injure the employer's interests.

Thus, actions which do not violate such a duty are not misconduct. See Precedent Board Decision P-B-3

Let's consider an employee’s breach of a company policy or procedure. Violations of an employer’s policies and procedures may be valid reasons to discipline an employee, including termination, if repeated violations occur. Further, some violations may justify an immediate termination. However, unemployment insurance law does not allow an employee to be discharged without consequences to the employer’s EDD tax rate, for breach of an unwritten or undefined rule, except for such things as stealing company property, gross negligence, gross insubordination, fighting on job, sexual assault, etc. Therefore, the key to success at the Employment Development Department (EDD) and at the California Unemployment Insurance Appeals Board (CUIAB) is adequate documentation and the appropriate workplace policies and procedures.

Absent extraordinary circumstances, such as referenced above, the EDD and the Administrative Law Judges expect to see a copy of the employer’s policy/procedures, proof that the employee was aware of the policy/procedures, proof as to how the policy/procedures were breached, evidence of any performance warnings issued, and evidence as to how the breach of the policy/procedures injured company interests.

It is important for employers to understand that if the breach of a company policy or procedure is not documented in the employee’s personnel file, courts may hold that “it did not happen.” Therefore, it is essential to properly document.

The following are examples of common problems faced by employers that lead to employers losing “discharge for misconduct” cases at the EDD and CUIAB:
• No proof employee knew of employer’s policy/workplace rule.

Employers must have written documentation that proves the employee “knew” of the policy/rule. The easiest way is to have a signed acknowledgement of receipt of the policy/rule (such as a signed employee handbook which contains the policy/rule) by the employee, in the personnel file;

• The employer fails to offer evidence that the employee’s duty, required by the policy/rule, was “material” (i.e. important to the company).

• There is insufficient proof that the employee “substantially breached” the policy/rule.

Employers must present evidence of a “substantial breach” of the employer’s policy/workplace rule. Examples of sufficient evidence: Company records, sworn witness statements, drawings, photographs, police reports, etc;

• The employee proves the employer’s policy/rule was inconsistently enforced.

Employers must be sure their company rules are equally enforced. For example: If an employer tolerates numerous tardiness in an month from some employees, the employer cannot then hold another employee to one tardy a month;

• The employer condones a breach of the policy/rule.

Employers wait too long to take disciplinary action following a substantial, willful breach of duty.

• Progressive discipline was not established, in the workplace.

The EDD and the CUIAB judges expect employers to show that they made a reasonable effort to change an employee's bad behavior, before discharging the employee;

• The employer fails to show how the breach harms (injures) its interests.

The employer must present evidence as to how the breach harmed the company;

• The employer cannot prove the last breach was “willful” or not for good cause.

This is a huge problem and probably a major reason that employers lose misconduct cases at the EDD.

Finally, employers should do the following:
• Send copies of their documents to the EDD as soon as an employee makes a claim for unemployment benefits;
• Immediately return all EDD telephone calls;
• Be sure to timely appeal (20 days) an adverse EDD determination;
• Attend CUIAB hearings with their witness and original documents;
• Be present at the hearing location at least 15 minutes before the hearing commences;
• Cite Precedent Board (PB) decisions supporting their case to both the EDD (when objecting to the claim), and when appealing to an administrative law judge; and,
• Ask the judge, after all evidence is in, and the judge states “anything further”, for the opportunity to make a “brief” closing statement. Do not take more than a minute or so.

David W. O'Brien, Esq
Floyd, Skeren & Kelly, LLP
A Former Administrative Law Judge with the CUIAB

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