Opinion
No. 708 C.D. 2013
02-19-2014
Dean F. Palm, Petitioner v. Unemployment Compensation Board of Review, Respondent
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY SENIOR JUDGE COLINS
Dean F. Palm (Claimant) petitions for review of a March 26, 2013 order of the Unemployment Compensation Board of Review (Board), in which the Board affirmed the determination made by a Referee that Claimant was ineligible for benefits due to willful misconduct under Section 402(e) of the Unemployment Compensation Law (Law). We affirm.
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(e). Section 402(e) of the Law provides, in relevant part, that an employee shall be ineligible for compensation for any week in which his or her unemployment is due to willful misconduct connected to his or her work.
Claimant was employed as an Investment Services Associate at PNC Investments (Employer) from September 8, 2008 through September 10, 2012. (Record Item (R. Item) 19, Board's Decision and Order, Finding of Fact (F.F.) ¶1.) Employer is regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA). (Id. ¶5.) To comply with FINRA regulations, Employer maintains strict policies requiring ethical behavior of its employees and prohibiting the falsification of company documents. (Id. ¶¶2, 6.) Furthermore, because all Employer's employees must be covered under Employer's fidelity bond, Employer maintains a policy that prohibits employees from engaging in any dishonest act, whether or not that act results in actual monetary loss. (Id. ¶2.)
One aspect of Claimant's duties at Employer included the completion of brokerage account applications for customers over the telephone. (Id. ¶3.) In completing an application, Claimant was expected to ask a customer questions on various sections of the application and accurately note the customer's responses. (Id. ¶4.) In or about August 2012, Employer received a complaint from a customer alleging that the customer's brokerage account application, which had been completed by Claimant, contained inaccurate information. (Id. ¶7.) Employer investigated and determined that Claimant had at least three telephone conversations with the customer and that Claimant failed to ask some of the required questions to complete the application but instead recorded his assumptions based on the conversations with the customer. (Id. ¶¶8, 9.) In a conversation with an Employer investigator, Claimant acknowledged that he had recorded his assumptions instead of information provided by the customer and admitted that this was a "mistake." (Id. ¶¶10, 11.) Based upon this investigation, Employer concluded that Claimant had violated Employer's policies and terminated Claimant's employment. (Id. ¶12.)
Claimant filed for unemployment compensation benefits on September 22, 2012 and received benefits through the week of November 10, 2012. (R. Item 1, Claim Record.) On November 21, 2012, the Unemployment Compensation Service Center issued a Notice of Determination finding that Claimant was terminated for willful misconduct and was therefore ineligible for benefits. (R. Item 7.) The Notice also established a non-fault overpayment of benefits in the amount of $3,948 under Section 804(b) of the Law. (Id.)
Section 804(b)(1) of the Law provides, in relevant part, that: "Any person who other than by reason of his fault has received with respect to a benefit year any sum as compensation under this act to which he was not entitled shall not be liable to repay such sum but shall be liable to have such sum deducted from any future compensation payable to him with respect to such benefit year, or the three-year period immediately following such benefit year." 43 P.S. §874(b)(1).
Claimant appealed the Notice and a hearing was held before a Referee on January 17, 2013. At the hearing, Claimant and two witnesses for Employer, Lenette Seibel and Kenneth Duncan, testified. Seibel, an Employee Relations Investigator, testified that she was assigned to investigate Claimant's actions after the customer complaint and, as part of her investigation, she reviewed the application and recordings of three calls between Claimant and the customer and interviewed Claimant. (R. Item 15, Jan. 17, 2013 Hearing Transcript (H.T.) at 4-6.) Seibel testified that Claimant admitted during his interview that he had not asked the customer questions regarding numerous parts of the application, including the customer's employment status, investment product knowledge, transactions per year, risk tolerance, suitability income and percentage of assets held away, and instead filled in his own assumptions on these sections of the application. (Id. at 5-6, 9.) Seibel testified that Claimant's assumptions were considered to be falsification of company documents and the decision to terminate Claimant was based on the fact that all employees at Employer were required to have a fidelity bond and any dishonest act could affect an employee's ability to maintain bond coverage. (Id. at 6, 8-9.) Seibel further testified that Claimant had gone through training and was thus aware of Employer's policies regarding bond coverage, falsification of company documents and dishonesty. (Id. at 6-8.)
Duncan, who was a Site Manager at Employer and Claimant's supervisor's supervisor, testified that FINRA regulations require that employees collect certain customer information in order to determine whether a particular strategy or investment is suitable for that customer. (Id. at 10-11.) Duncan stated that he believed Claimant's assumptions to be in direct violation of FINRA regulations and that the purpose of the regulations was to prevent the sale of inappropriate products to customers. (Id. at 11.) Duncan further testified that Claimant's actions could have potentially led to FINRA sanctions, including censure and a prohibition from transacting business in the securities industry. (Id.)
Claimant testified that he had in fact spoken to the customer approximately eight times over the course of three months and that the answers on the application were based upon all of these conversations, not just the three conversations reviewed by Employer during the investigation. (Id. at 13.) Claimant conceded that he did make assumptions and did not ask all of the precise questions that were required to fill out the application, but he maintained that the inaccuracies on the application were not intentional and did not amount to falsification. (Id. at 13-16.) Claimant stated that the customer was difficult to deal with and that the customer was given the option to review the application before its completion and make corrections. (Id. at 13.) Claimant further testified that extrapolation of specific information for applications from general conversations was a common practice at Employer. (Id. at 16.)
On January 17, 2013, the Referee issued a decision and order affirming the determination of the Service Center that Claimant was ineligible for benefits under Section 402(e) of the Law and that Claimant had received a non-fault overpayment. (R. Item 16.) Claimant appealed the Referee's decision, and the Board affirmed. The Board concluded that Employer met its burden of demonstrating that Claimant engaged in a dishonest act by recording his assumptions of the customer's investment profile and that this violated Employer's policies. (R. Item 19, Board Decision and Order, Discussion at 3.) The Board determined that the fact that Claimant was dealing with a challenging customer did not amount to good cause for Claimant's actions and that there was insufficient credible evidence to establish that extrapolation of information in completing applications was condoned by Employer. (Id. at 4.) Claimant filed a timely petition for review of the Board's order.
Our standard of review is limited to determining whether constitutional rights were violated, whether an error of law was committed, or whether necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S. § 704; Temple University v. Unemployment Compensation Board of Review, 565 Pa. 178, 182 n.1, 772 A.2d 416, 418 n.1 (2001).
Whether a claimant's conduct rises to the level of willful misconduct is a question of law subject to this court's plenary review. Oliver v. Unemployment Compensation Board of Review, 5 A.3d 432, 438 (Pa. Cmwlth. 2010). Though not defined in the Law, willful misconduct has been interpreted by the courts of the Commonwealth to include: (i) wanton and willful disregard of the employer's interests; (ii) a deliberate violation of the employer's rules; (iii) a disregard of the standards of behavior that the employer rightfully can expect from its employees; and (iv) negligence that manifests culpability, wrongful intent or evil design, or an intentional and substantial disregard of the employer's interests or the employee's duties and obligations. Id.; Guthrie v. Unemployment Compensation Board of Review, 738 A.2d 518, 521 (Pa. Cmwlth. 2011).
The initial burden of proving willful misconduct lies with the employer. Navickas v. Unemployment Compensation Board of Review, 567 Pa. 298, 303, 787 A.2d 284, 288 (2001). Where a violation of the employer's rules is alleged, the employer must show the existence of the rule and the violation of the rule by the claimant. ATM Corporation of America v. Unemployment Compensation Board of Review, 892 A.2d 859, 865 (Pa. Cmwlth. 2006). The employer must also demonstrate that the conduct that violated the rule was of an intentional and deliberate nature and not merely negligent. Grieb v. Unemployment Compensation Board of Review, 573 Pa. 594, 600, 827 A.2d 422, 426 (2003). If the employer meets its burden of establishing a violation of the rule, the burden then shifts to the claimant to show good cause for the proven conduct. Henderson v. Unemployment Compensation Board of Review, 77 A.3d 699, 719 (Pa. Cmwlth. 2013); Oliver, 5 A.3d at 438. A determination of whether conduct amounts to willful misconduct requires an examination of the entire circumstances, including the reasons for the employee's noncompliance with the employer's rules. Grieb, 573 Pa. at 600, 827 A.2d at 426.
Claimant first argues that the mistakes on the customer's application were honest and minor mistakes and not the type of intentional and deliberate acts required for a finding of willful misconduct. Claimant asserts that there were only three minor mistakes on the application: two phone numbers were incorrect and for the customer's employment status he had incorrectly indicated that the customer received social security when in fact the customer received only a pension. (H.T. Employer's Ex. 1 at 2-3.) Furthermore, the customer was required to review the application and sign it before it was a final document and, according to Claimant, the customer only noted these three minor mistakes.
Claimant's argument is premised upon the customer's alleged handwritten changes and initials on these specific areas of the application, and the fact that the customer allegedly did not initial any other sections of the application. However, Claimant's argument that these were the only three inaccuracies in the application is contrary to the record. The testimony of Employer's witnesses and Claimant himself indicate that Claimant made assumptions on more than just the customer's telephone numbers and employment status. Seibel testified that Claimant admitted during his interview that he had failed to ask the customer questions yet still filled in information on "numerous parts of the application," including the customer's investment product knowledge, transactions per year, risk tolerance, suitability income, percentage of assets held away and employment status. (H.T. at 5-6.) Duncan also testified that he and Seibel asked Claimant whether he had made assumptions on issues such as the customer's investment history and portfolio and that Claimant answered in the affirmative. (Id. at 11.) During his testimony, Claimant confirmed that he did not ask the customer all of the required questions, including the number of transactions the customer completed per year, and instead made assumptions on the application. (Id. at 15-16.) Contrary to Claimant's contentions, this evidence demonstrates that the Board correctly concluded that Claimant's assumptions were more than minor mistakes caused by negligence but rather the type of intentional and deliberate acts that may serve as the basis for a finding of willful misconduct.
While Claimant cites to the alleged handwritten notes of the customer on the application, Claimant's counsel objected to Seibel's testimony regarding the customer's complaint and handwritten changes to the application as hearsay, and the Referee sustained the objections. (H.T. at 5-6.) The Referee admitted the application with the provision that he would not consider the markings made by the customer and directed Seibel to testify only regarding her own review of the application and the investigation that followed. (Id.) Claimant testified that there were mistakes on the application (id. at 13), but at no point during his testimony did he identify the phone numbers and employment status as the only parts of the application that were inaccurate.
Claimant next argues that the Board's finding that Claimant made assumptions rather than record the customer's answers was not supported by substantial evidence. The Board is the ultimate finder of fact and arbiter of witness credibility, and where its findings are supported by substantial evidence, those findings are conclusive on appeal. Bruce v. Unemployment Compensation Board of Review, 2 A.3d 667, 671 (Pa. Cmwlth. 2010). Substantial evidence is that evidence which a reasonable mind, without weighing the evidence or substituting its judgment for that of the fact finder, might accept as adequate to support the conclusion reached. Solar Innovations, Inc. v. Unemployment Compensation Board of Review, 38 A.3d 1051, 1055 n.4 (Pa. Cmwlth. 2012).
Claimant specifically challenges the following statement by the Board as unsupported by the evidence: "Here, it is undisputed that the claimant made assumptions rather than to record accurate responses from the customer." (R. Item 19, Board Decision and Order, Discussion at 3.) However, this conclusion by the Board does not mean, as Claimant contends, that Claimant asked the customer questions in order to elicit information for the application and then "ignored [the customer's] allegedly 'accurate responses' and recorded his own mistaken assumptions instead." (Claimant Br. at 25.) Rather, the Board's findings of fact make clear that Claimant failed to ask the questions required to complete the application and instead filled in his own assumptions of the customer's answers. (See F.F. ¶9 ("Some of the questions that the claimant was expected to pose to the customer were not asked and instead of recording customer responses, the claimant made assumptions based upon information he had gleaned from the customer."); F.F. ¶11 ("The claimant acknowledged that he had made assumptions rather than recorded answers provided by the customer and admits that this was a 'mistake.'").) As discussed above, the testimony of both Employer witnesses and Claimant himself supports the findings that Claimant failed to ask questions concerning various portions of the application and instead filled in his own assumptions. (H.T. at 5-6, 11, 15-16.) Accordingly, we conclude that the Board's decision is supported by substantial evidence.
Claimant next argues that his conduct should be excused because he worked to the best of his ability considering the difficulty he had in eliciting the required information from the customer - essentially that he had "good cause" for his conduct. A claimant may show good cause as a justification for the willful misconduct where his actions are justified or reasonable under the circumstances. Henderson, 77 A.3d at 719. The claimant bears the burden of demonstrating good cause. Id.
There is no doubt that the customer was challenging and that this made it difficult for Claimant to accurately complete the application. Duncan testified that Claimant stated in his interview that the customer was challenging and that the inaccuracies in the application were a result of the customer's behavior, and Claimant confirmed that any inaccuracies in the application were the result of the challenging nature of the customer. (H.T. at 11, 13.) The Board, however, concluded that the challenges Claimant faced in dealing with the customer did not justify the assumptions made by Claimant on the application. (R. Item 19, Board Decision and Order, Discussion at 4.) We agree. While the customer's behavior may have excused Claimant from being unable to complete the application, it does not justify the intentional fabrication of information that occurred here.
Claimant's last argument is that his actions did not violate Employer's work rules. The Board found that Employer maintained policies that prohibited dishonest acts and the falsification of company documents, Claimant was aware of these policies and that Claimant's actions violated these policies. (R. Item 19, Board Decision and Order, F.F. ¶2, Discussion at 3.) These policies included (i) a bonding policy that required all employees be covered under Employer's fidelity bond at all times and provided for the suspension of bond coverage and dismissal for any employee who engages in a "dishonest act," including "misrepresenting information on a company document including but not limited to...business documentation," (F.F. ¶2; H.T. Referee's Ex. 14 at 1-2); and (ii) a policy prohibiting "falsifying corporate records" and providing for immediate employment termination for any person who engaged in such conduct. (F.F. ¶2; H.T. Referee's Ex. 15 at 2.)
Claimant's argument that his actions could not have violated Employer's work policies is in three parts. First, Claimant argues that the misstatements on the application were not willful misconduct because they do not satisfy all of the standards of intentional misrepresentation or negligent misrepresentation tort causes of action, including the elements of materiality, intent to induce another to act and scienter. See Bortz v. Noon, 556 Pa. 489, 499, 729 A.2d 555, 560 (1999) (intentional misrepresentation standard); Commonwealth v. TAP Pharmaceutical Products, Inc., 36 A.3d 1197, 1276 (Pa. Cmwlth. 2011) (negligent misrepresentation standard). This argument misconstrues the willful misconduct standard applied by the Board. An employer is not required to show that an employee's actions rose to the level of a tortious or criminal act in order to prove that the employee's violation of a work rule constituted willful misconduct; rather, the employer is only required to prove that the rule existed at the time of the conduct, that the employee was aware of the rule and that the employee intentionally and deliberately violated the rule. Henderson, 77 A.3d at 718-19. Employer presented evidence that it maintained policies prohibiting its employees from "falsifying corporate records" and "misrepresenting information on a company document," and that Claimant was aware of these policies. (H.T. Referee's Exs. 12, 14, 15.) Employer also presented two witnesses who testified that Claimant was required to ask questions of the customer on the application in order to determine her suitability for investment recommendations, Claimant did not ask the required questions during the telephone calls with customer, and Claimant instead entered inaccurate information on key portions of the application based upon his own assumptions of the customer's information. (Id. at 5-6, 10-12.) Claimant himself conceded that he entered his assumptions on the application during his testimony. (Id. at 15-16.) Thus, the Board was justified in concluding that Claimant intentionally and deliberately falsified information on company documents in violation of Employer's policy.
Second, Claimant contends that he could not have committed a "dishonest act" that violated Employer's policy requiring that its employees be covered at all times by Employer's fidelity bond because his actions were not made with an intent to defraud or with the goal of personal profit. In support of this argument, Claimant cites Universal Credit Co. v. United States Guarantee Co., 321 Pa. 209, 183 A. 806 (1936), in which our Supreme Court held that "[n]egligence, a mere dereliction in the terms of an employment, [and] a misstatement not accompanied by designed intent to defraud or to profit thereby, are not acts of dishonesty or fraud such as are within the contemplation of this bond." Id. at 212, 183 A. at 807. In Universal Credit, however, the Supreme Court was addressing only the issue of whether an employee's acts were within the terms of a fidelity bond that covered "any act or acts of fraud, dishonesty, larceny, embezzlement, forgery or wrongful extraction." Id. at 210, 183 A. at 806. The issue before us is not whether Claimant's actions were covered under Employer's fidelity bond, but rather whether Claimant's actions violated Employer's policy providing that coverage under the bond would be suspended and employment could be terminated if an employee engages in a "dishonest act." (H.T. Referee's Ex. 14.)
Moreover, in contrast to the terms of the fidelity bond in Universal Credit, Employer's policy provides that an employee could be terminated for a dishonest act "whether or not it constitutes a crime" and "regardless of whether there is actual monetary loss" and includes specific examples of dishonest acts which could result in the termination of employment, including "misrepresenting information on a company document, including but not limited to expense reports, business documentation and the employment application." (H.T. Referee's Ex. 14 at 1, 2.) As described above, Employer presented substantial evidence demonstrating that Claimant had intentionally and deliberately entered inaccurate information on the application. Therefore, we decline to adopt Claimant's view that Employer must also prove fraudulent intent or a profit motive, and we conclude that Employer did indeed prove willful misconduct on the part of Claimant.
Claimant's final argument why he could not have violated any of Employer's policies is that any alleged false statements could not be said to have appeared in a "company document" because the application was given to the customer for her review and signature and thus was not a final, legally operative document until it was signed. In support of this argument, Claimant cites various decisions holding that certain types of documents are not deemed to have a legal effect without a signature, e.g., Syme v. Bankers National Life Insurance Co., 393 Pa. 600, 144 A.2d 845 (1958) (holding that insurance application could not bind the insured unless it bore his signature); Forgash v. Department of Public Welfare, 629 A.2d 201 (Pa. Cmwlth. 1993) (holding that unsigned food stamp recertification was property denied), and language in the application that indicates that by signing the application the customer acknowledged that she had read and understood the application and affirmed the information provided was accurate. (H.T. Employer's Ex. 1 at 9.)
Contrary to Claimant's contentions, however, Employer's policies proscribing misrepresentations on company documents contain no language that would limit their application only to executed documents or legally operative documents. Employer's policies include various examples of documents as to which the prohibition on falsification applies, including time sheets, expense reports, business documentation, employment applications and leave of absence paperwork (H.T. Referee's Exs. 14, 15); while some of these may require a signature as a matter of course there is no basis to extrapolate a signature requirement for all types of documents covered by Employer's policies. Nor does Claimant cite any applicable provision of Pennsylvania law for his definition of the term "document" to only include signed documents. Furthermore, though the application was still provisional until it bore the customer's signature, that does not make it any less of a "document" before it was signed; indeed, once sent to the customer for her signature it was then a correspondence sent outside the company as to which the Employer would reasonably expect would be free of falsehoods.
The term "document" is not a legal term of art with a fixed definition, nor is there a general statutory definition of "document" in the body of Pennsylvania statutes. Pennsylvania Rule of Civil Procedure 4009.1, for example, defines documents generally to include "writings, drawings, graphs, charts, photographs, and electronically stored information." Pa. R.C.P. No. 4009.1(a). Claimant cites a definition of "document" in Black's Law Dictionary as "[a]n instrument on which is recorded, by means of letters, figures, or marks, the original, official or legal form of something, which may be evidentially used." Black's Law Dictionary 481 (6th ed. 1990). While we see no reason that the application would not fall within this definition as an original form of a document that could be evidentially used, we also note that this definition of document is not universal and a more recent edition of Black's includes a more general definition of "document" as "[s]omething tangible on which words, symbols, or marks are recorded." Black's Law Dictionary 555 (9th ed. 2009). --------
Accordingly, because Employer provided substantial evidence that Claimant engaged in an intentional and deliberate violation of Employer's policies and Claimant did not have good cause for his actions, we conclude that the Board properly concluded that Claimant was ineligible for unemployment compensation benefits due to willful misconduct. The order of the Board is affirmed.
/s/ _________
JAMES GARDNER COLINS, Senior Judge ORDER
AND NOW, this 19th day of February, 2014, the Order of the Unemployment Compensation Board of Review in the above-captioned matter is hereby AFFIRMED.
/s/ _________
JAMES GARDNER COLINS, Senior Judge