Opinion
No. 106,769.
2012-10-5
Kenneth J. NOONAN, Appellee, v. KANSAS EMPLOYMENT SECURITY BOARD OF REVIEW, Appellant, and Wal–Mart Associates, Inc., Appellee.
Appeal from Saline District Court; Jared B. Johnson, Judge. Brett A. Flachsbarth and Justin McFarland, of Kansas Department of Labor, for appellant. Larry G. Michel and Karen Q. Couch, of Kennedy Berkley Yarnevich & Williamson, Chartered, of Salina, for appellee, Kenneth Noonan.
Appeal from Saline District Court; Jared B. Johnson, Judge.
Brett A. Flachsbarth and Justin McFarland, of Kansas Department of Labor, for appellant. Larry G. Michel and Karen Q. Couch, of Kennedy Berkley Yarnevich & Williamson, Chartered, of Salina, for appellee, Kenneth Noonan.
Before GREENE, C.J., PIERRON and ARNOLD–BURGER, JJ.
MEMORANDUM OPINION
PER CURIAM.
Wal–Mart Associates, Inc., (Wal–Mart) terminated Kenneth J. Noonan's employment as a store manager after Noonan wore superhero underwear briefs over his pants at a store meeting. An examiner from the Kansas Department of Labor initially found that Noonan was disqualified for unemployment benefits because he committed misconduct connected to his work. However, an unemployment judge held an evidentiary hearing and concluded that Noonan was entitled to benefits as his action was a single instance of misjudgment. The Kansas Employment Security Board (Board) reversed the unemployment judge's decision. After a review of the transcript the Board concluded that Noonan was actually disqualified from receiving benefits because of misconduct. A timely appeal to the district court resulted in yet another reversal in which the court held that Noonan was entitled to benefits under the same reasoning as stated by the unemployment judge. The Board appeals. We affirm the district court.
The events leading up to Noonan's termination are undisputed. Whether he is entitled to unemployment benefits as a result of his termination is highly contested.
Noonan worked for Wal–Mart from May 18, 1990, to January 12, 2010, almost 20 years. He became the manager of the Wal–Mart in Salina in October 2000 and continued in that capacity until his termination.
In early December 2009, Noonan scheduled and held a Friday-morning meeting at the Wal–Mart store, which was attended by approximately 50 Wal–Mart employees. Prior to the meeting, Noonan observed that his employees were stressed from the busy holiday season, so he decided to lighten up the mood of the meeting. Noonan and three other salaried managers put superhero underwear briefs over their pants and paraded around in a 2–minute fashion show at the start of the meeting. Noonan also placed a small paperweight rock in the front pouch of the underwear to give himself a bulge.
An anonymous letter was sent to Wal–Mart headquarters on December 31, 2009, complaining of Noonan's conduct at the meeting. The letter stated:
“At our Friday meeting this past week we had a fashion show. Store manager and management team wore super hero underwear over there [ sic ] pants. They put something in the front of their underwear to make them look much bigger !!!! This whole thing was in very poor taste. The employee sitting next to me felt this was sexual harhassment [ sic ]. This is how Wal Mart want there [ sic ] management to conduct themselves. Salina Kansas.”
Wal–Mart perceived Noonan's conduct at the meeting as a violation of the company's Discrimination & Harassment Prevention Policy (PD–19) and terminated Noonan's employment on January 12, 2010. After his discharge, Noonan filed for unemployment insurance benefits. Wal–Mart objected to Noonan's receipt of any unemployment benefits.
The Kansas Department of Labor initially denied Noonan unemployment benefits. An examiner determined: “Claimant was discharged for failure to comply with a company policy. Claimant was aware of the policy. Misconduct is a violation of a duty or obligation reasonably owed the employer. The claimant was discharged for misconduct connected with the work.”
Noonan appealed the examiner's decision and received a full hearing before Unemployment Insurance Judge Barbara Lundin. Judge Lundin reversed the examiner's decision and ordered Noonan to receive benefits. After hearing testimony and seeing the witnesses, it was Judge Lundin's opinion:
“The claimant perceived that a moment of hilarity or levity was needed in the company meeting that took place on Friday, December 11, 2009. To get a laugh, he and three other men wore super hero briefs over their pants. The claimant put a weight or rock in his [pants], which made his genital area seem larger. Someone was offended. No person who attended the meeting and was offended appears at the hearing.
“The claimant was an exemplary store manager. He never received any ‘coaching for improvement’ during his entire nearly 20 years with the company. At worst, he committed a single good-faith error in judgment on December 11, 2009 for two minutes of a store meeting at which time to interject some levity into stress filled lives of employees at holiday time, he modeled the [company-sold] action hero adult briefs with a paper weight in his briefs over his street clothes. The statute, cited above, [K.S.A. 44–706(b)(4) ] allows unemployment benefits when an employer discharges an exemplary employee for a single instance of misjudgment. The claimant is cleared for benefits. The employer's experience rating account will be charged.”
Wal–Mart appealed Judge Lundin's reinstatement of benefits to the Board. The Board indicated that Noonan's actions were entirely within his control and despite his intentions, the actions constituted a clear violation of a duty or obligation reasonably owed to Wal–Mart. In a 2–1 decision, the Board stated:
“The claimant was the store manager responsible for setting an example for all of his employees. But his actions at the meeting were so outside the bounds of appropriate workplace behavior, and presented so many possible negative repercussions to the employer, that misconduct is clearly established. The claimant's behavior is also not excused on that basis that it constituted a single instance of misjudgment. Under Kansas law, multiple occurrences of misconduct are not required to disqualify claimant from receiving unemployment compensation benefits; a single instance of misconduct is sufficient. Helmick v. Kansas Employment Sec. Bd of Review, 17 Kan.App.2d 444, 839 P.2d 49 (1992). The Board may empathize with the claimant's departure from his long-time employer, but his actions constitute statutory misconduct.
“The Unemployment Judge's decision is reversed. The claimant is disqualified for benefits beginning January 13, 2010 because he was discharged for misconduct under K.S.A. 44–706(b). The employer's experience rating account is not charged.”
Noonan appealed to the district court. The district court reversed the Board and reinstated Noonan's unemployment benefits. The district court agreed with Judge Lundin. The court found Noonan's conduct was an isolated instance of ordinary negligence and/or a good-faith error in judgment and discretion. See K.S.A. 44–706(4)(b)(iii) & (iv). Consequently, the court found the Board erroneously interpreted the law and Noonan was entitled to unemployment benefits.
The Board first argues the district court erroneously interpreted the employment security law by overruling its decision to deny Noonan unemployment benefits.
Our review of a decision by the Kansas Employment Security Board of Review is governed by the Kansas Judicial Review Act (KJRA), K.S.A. 77–601 et seq , see K.S.A.2011 Supp. 44–709(i); National Council on Compensation Ins. v. Todd, 258 Kan. 535, 538, 905 P.2d 114 (1995). The KJRA mandates that a reviewing court will grant relief if it determines that the agency erroneously interpreted or applied the law. K.S.A.2011 Supp. 77–621(c)(4); Redline Express, Inc. v. Kansas Employment Security Board, 27 Kan.App.2d 1067, 1068–69, 11 P.3d 85 (2000), rev. denied 270 Kan. 899 (2001).
In reviewing a district court's decision reviewing an agency action, we must first determine whether the district court observed the requirements and restrictions placed upon it and then make the same review of the administrative agency's action as did the district court. Connelly v. Kansas Highway Patrol, 271 Kan. 944, 964, 26 P.3d 1246 (2001), cert. denied534 U.S. 1081 (2002). It is axiomatic in an unemployment compensation case that the findings of fact made by the Board, or by the referee as the case may be, are conclusive on appeal so long as the record, taken as a whole, contains substantial evidence to support those findings. See Herrera–Gallegos v. H & H Delivery Service, Inc., 42 Kan.App.2d 360, 362–63, 212 P.3d 239 (2009). It is true, however, that the legal conclusions drawn by the Board or the unemployment judge from its findings of fact are subject to judicial review. See K.S.A.2011 Supp. 77–621(c)(4)(court will grant relief if it determines that the agency erroneously interpreted or applied the law.). It is the application of the good-faith exceptions of K.S.A.2011 Supp. 44–706(b)(4) that we are considering on appeal.
A person claiming benefits under the Employment Security Act is entitled to a liberal interpretation of the law. See K.S.A.2011 Supp. 77–621(a)(1); National Gypsum Co. v. Kansas Employment Security Bd. of Review, 244 Kan. 678, 687, 772 P.2d 786 (1989). Employees discharged for “misconduct” are not eligible for unemployment compensation benefits under K.S.A.2011 Supp. 44–706(b). Misconduct “is defined as a violation of a duty or obligation reasonably owed the employer as a condition of employment.” K.S.A.2011 Supp. 44–706(b)(1). See Helmick v. Kansas Employment Security Bd. of Review, 17 Kan.App.2d 444, 446, 839 P.2d 49 (1992) (“[A] single instance of misconduct is sufficient to disqualify a claimant where the individual has been discharged for misconduct”).
We recognize that the Kansas legislature has clearly indicated that an individual shall be disqualified for unemployment benefits if the individual is discharged for misconduct connected with the individual's work. K.S.A.2011 Supp. 44–706(b). However, it is equally clear there are statutorily provided exceptions to this rule. Not all possible misconduct will disqualify an individual from unemployment benefits. Some actions do not constitute misconduct. Specifically in the present case, an individual “shall not be disqualified” from unemployment benefits if the individual was making a good-faith effort to do the assigned work but was discharged due to “isolated instances of ordinary negligence” or “good-faith errors in judgment or discretion.” K.S.A.2011 Supp. 44–706(b)(4)(B)(iii) & (iv). We must decide whether these exceptions to the rule are applicable to Noonan's termination.
In City of Wichita v. Employment Security Bd., 13 Kan.App.2d 729, 733, 779 P.2d 41 (1989), the court upheld a district court decision granting unemployment benefits to a terminated employee. The employee in City of Wichita was a sewer maintenance worker, with a history of absenteeism, who was fired when he drank one sip of beer at work, which violated a work rule. The court ruled that the proper focus when examining whether an employee has been fired for misconduct is whether the statutory definition of misconduct has been met, not whether a work rule has been violated. 13 Kan.App.2d at 732. The court then held that drinking one sip of beer is not misconduct under K.S.A.1988 Supp. 44–706(b)(1) because the employee's act “was not substantially adverse to the City's interests and did not amount to negligence of such a degree as to show wrongful intent or evil design.” 13 Kan.App.2d at 733. The court in City of Wichita cited the exception language now found in K.S.A.2011 Supp. 44–706(b)(4)(B)(iv) and in its holding stated: “The facts of this case may more properly be viewed as an isolated instance of ordinary negligence.” 13 Kan.App.2d at 733.
The Board correctly points out that City of Wichita was decided under a different definition of “misconduct” than is currently found in K.S.A.2011 Supp. 44–706(b)(1). Although the City of Wichita court found no “wrongful intent” negligence, the court would have presumably come to the same conclusion today under the current version of K.S.A.2011 Supp. 44–706(b) because the employee's conduct was still “an isolated instance of ordinary negligence.” See 13 Kan.App.2d at 733. Consequently, the Board's attempt at distinguishing of the City of Wichita case is not persuasive.
K.S.A. 44–706 was enacted to deny benefits to some of those who bring about their own unemployment by actions which justify the employer discharging the employee. National Gypsum Co., 244 Kan. at 681. The burden of proof to establish that a former employee is disqualified from benefits under K.S.A.2011 Supp. 44–706(b) is upon the employer and must be proved by a preponderance of the evidence. See 244 Kan. at 687. However, as alluded to by the Board, the definition of “misconduct” in K.S.A. 44–706(b)(1) was amended in 1995 to relax the standard for finding employee misconduct by eliminating requirements of willful and intentional acts or carelessness or negligence showing wrongful intent or evil design. See L.1995, ch. 235, sec. 3; Pouncil v. Kansas Employment Security Board of Review, 268 Kan. 470, 471–72, 997 P.2d 715 (2000). Those “intent” elements are now found in the definition of “gross misconduct.” See K.S.A.2011 Supp. 44–706(b)(1) (“The term ‘gross misconduct’ as used in this subsection shall be construed to mean conduct evincing extreme, willful or wanton misconduct as defined by this subsection.”).
The Board argues that Noonan's position in this case as a store manager in charge of the conduct and discipline of nearly 400 employees makes his violation of store harassment policy all the more glaring and contrary to Wal–Mart's legitimate and important business interests. The Board argues this factor alone is what distinguishes the maintenance worker in City of Wichita from Noonan's position as a Wal–Mart manager responsible for over 400 employees. Further, Noonan had a captive audience of 50 employees at the meeting and his actions “severely undermine the ability of the employer to enforce its standards.” The Board also argues that Wal–Mart has a legitimate interest in limiting exposure to claims of sexual harassment in the workplace.
The Board also maintains the district court improperly reweighed the evidence by relying on Noonan's claim that he witnessed Wal–Mart executives dressing in drag to lighten the mood at other company events. The Board claims it found this self-serving testimony to be unpersuasive. The Board argues the district court, and this court, can make a ruling that Noonan's conduct was a good-faith error in judgment only by reweighing the evidence—prohibited by our standards of review. We disagree.
The Board's position is essentially that Noonan's conduct was inexcusable misconduct permitting termination of his employment and further prohibiting unemployment compensation. However, in the Board's decision it is obvious the Board is impermissibly interchanging the terms “misconduct” and “misjudgment.” The Board held:
“The claimant's behavior is also not excused on that basis that it constituted a single instance of misjudgment. Under Kansas law, multiple occurrences of misconduct are not required to disqualify claimant from receiving unemployment compensation benefits; a single instance of misconduct is sufficient.... The Board may empathize with the claimant's departure from his long-time employer, but his actions constitute statutory misconduct ” (Emphasis added.)
“Misconduct” can prevent receipt of unemployment compensation. K .S.A.2011 Supp. 44–706(b). A good-faith error in judgment, i.e., “misjudgment,” is an exception to the rule and permits receipt of unemployment compensation. K.S.A.2011 Supp. 44–706(b)(4)(B)(iv).
After hearing the testimony and seeing the witnesses, the unemployment judge concluded that Noonan committed a single good-faith error in judgment, a “single instance of misjudgment,” and was entitled to benefits. This conclusion encompasses the statutory framework that misconduct serious enough to warrant an employee's dismissal is not necessarily serious enough to sustain forfeiture of unemployment compensation benefits. See Palmer News, Inc. v. Kansas Employment Security Bd. of Review, 24 Kan.App.2d 655, 657, 951 P.2d 546 (1997) (The purpose of our employment security law is to prevent economic insecurity resulting from involuntary unemployment.); K.S.A. 44–702 (purpose of unemployment benefits is to “lighten [the] burden which now so often falls with crushing force upon the unemployed worker and his family”); Goodyear Tire & Rubber Co. v. Employment Security Board of Review, 205 Kan. 279, 283, 469 P.2d 263 (1970)(person claiming unemployment benefits entitled to a liberal interpretation of the law).
In the case at bar, there is only one instance of conduct at issue. The Board claims it is misconduct. The unemployment judge and the district court viewed it as a single instance of misjudgment. The facts of this case support a finding of poor judgment, rather than misconduct of such a magnitude as to amount to a sacrifice of unemployment compensation. The unemployment judge and the district court found Noonan's actions to be a potential benefit of the employer because Noonan was trying to motivate and lighten the mood of his employees in the very stressful holiday shopping season. On the other hand, the Board viewed Noonan's actions as sexual harassment. Sexual harassment has no benefit to the company, and the situation presented a multitude of possible negative repercussions to Wal–Mart. We agree with the district court and the unemployment judge.
As a side note, we pause to remind that sexual harassment is not tolerable in any form in the workplace. Yet, Noonan's conduct is clearly at the opposite end of the spectrum in terms of cases where unemployment compensation is denied based on conduct involving sexual harassment. Cf Matter of Ferro, 283 A.D.2d 828, 829, 725 N.Y.S.2d 721 (2001) (unemployment benefits denied for misconduct for sexual harassment where the employer's witness testified that he observed claimant grab a female employee from behind and begin thrusting his hips forward); Zuraw v. Unempl. Comp. Bd. of Review, 61 Pa. Commw. 548, 550–51, 434 A.2d 1312 (1981) (unemployment compensation denied where claimant's behavior of hugging and touching female employees and removing his pants in front of a female employee was below the standards of behavior an employer has a right to expect of an employee). Further, the actions of Noonan and his senior management staff were not directed at any one individual, let alone evidence the actions were directed at the person(s) who anonymously complained to Wal–Mart headquarters.
We find that while Wal–Mart probably had the right to terminate Noonan's employment, unemployment benefits should be given to Noonan because of our finding that Noonan's conduct was a single instance of a good-faith error in judgment or discretion under K.S.A.2011 Supp. 44–706(b)(4)(B)(iv). It is with hindsight wisdom that we find Noonan's action to be poor judgment. He was the highest ranking employee in the Wal–Mart Store. He was the supervisor of over 400 employees. We, along with the unemployment judge and the district court, find that Noonan's actions were an honest attempt to lighten up the mood and entertain the employees at a weekly meeting in the midst of the stressful holiday season. We agree that Noonan's honest attempt is buttressed by his unblemished record as store manager for almost 20 years and also by his claim to have witnessed similar conduct at other Wal–Mart functions. See Roehl v. Kansas Department of Human Resources, No. 93,140, 2005 WL 1500971, at * 3 (Kan.App.2005) (unpublished opinion) (claimant acknowledged that his actions were “ ‘not the best of choices he could have made,’ “ and he characterized his behavior as a good-faith error in judgment under K.S.A.2004 Supp. 44–706[b] [4] ).
We affirm the decision of the district court and the unemployment judge and hold that Noonan is entitled to unemployment compensation benefits.
Affirmed.