Minnesota Supreme Court Issues Much-Needed Guidance Regarding “Employment Misconduct” in Unemployment-Benefits Cases
On Wednesday, April 20, 2011, in Stagg v. Vintage Place, Inc., No. A09-949, the Minnesota Supreme Court ruled that an employee who was discharged for excessive absenteeism and tardiness was discharged for misconduct, and thus could not collect unemployment benefits, even though his employer did not follow its established progressive discipline policy. The Court’s decision clarifies that, when the issue in an unemployment-benefits case is employee misconduct, the focus is on the employee’s conduct, not on the employer’s progressive discipline policy.
Vintage Place had a policy requiring its employees to give at least two hours’ notice if they were going to be late or absent. Vintage Place’s employee handbook set forth a five-step progressive disciplinary procedure for absenteeism and tardiness; employees were to receive an oral warning for the first unexcused absence, a written warning for the second, a three-day suspension for the third, a ten-day suspension for the fourth, and termination for the fifth. Stagg, who started working for Vintage Place in November 2007, began to experience issues with tardiness and absenteeism. Over the course of approximately two months, Stagg received warnings, probation, and a two-day suspension for his problems with attendance and tardiness. On January 28, 2009, Stagg called after his shift had began and said that he had overslept. He was discharged the following day.
Stagg submitted an application for unemployment benefits, but his application was denied by the Department of Employment and Economic Development (“Department”) because the Department determined that Stagg had been terminated for “employment misconduct” as defined in Minn. Stat. § 268.095, subd. 6(a). Under that statutory section, “employment misconduct” is defined as:
[A]ny intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly:
(1) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee; or
(2) a substantial lack of concern for the employment.
Employees discharged for such “employment misconduct” are ineligible for unemployment benefits. Minn. Stat. § 268.095, subd. 4(1) (2010).
Stagg appealed the Department’s denial, and a telephonic hearing was conducted by an Unemployment Law Judge (ULJ). At the hearing with the ULJ, Stagg argued that because he had not received a ten-day suspension—the last step short of termination in Vintage Place’s progressive discipline policy—he did not understand that he was at risk of losing his job. The ULJ, however, rejected Stagg’s argument, relying largely on the fact that Stagg had received multiple warnings regarding his tardiness and absenteeism. The ULJ found that Stagg’s actions “displayed a serious violation of the standards of behavior Vintage [Place] had a right to reasonably expect,” and, as a result, he was ineligible for unemployment benefits.
Stagg appealed to the Minnesota Court of Appeals. On appeal, the Court of Appeals reversed the ULJ’s decision, relying on its prior decision in Hoemberg v. Watco Publishers, Inc., 343 N.W.2d 676, 679 (Minn. Ct. App. 1984), rev. denied (Minn. May 15, 1984). In Hoemberg, the Court of Appeals reversed the denial of unemployment benefits to two employees who were discharged after running personal errands while on company time because the company’s progressive discipline policy provided for a warning, not immediate termination. The Court of Appeals concluded that the terminated employees could have reasonably expected the company to follow its handbook provisions, and, since the company failed to do so, the employees’ actions did not amount to employment misconduct under Minn. Stat. § 268.095, subd. 6(a). Similarly, in the present case, the Court of Appeals determined that Stagg could have reasonably expected Vintage Place to follow the progressive disciplinary steps outlined in its employee handbook and, since Vintage Place skipped the fourth step (a ten-day suspension), Stagg’s absenteeism did not constitute employment misconduct. Stagg was thus eligible for unemployment benefits.
Minnesota Supreme Court’s Opinion
The Minnesota Supreme Court reversed, concluding that the Court of Appeals’ analysis in the case at issue and in Hoemberg did not comport with the definition of “employment misconduct” in the statute. Specifically, Minn. Stat. § 268.095, subd. 6(a) states that an employee engages in employment misconduct if the employee clearly displays “a serious violation of standards of behavior the employer has a right to reasonably expect of the employee.” Thus, the Court said, the focus is on the employee’s conduct, not on the employer’s progressive discipline policy: “[A]n employee’s expectation that the employer will follow its disciplinary procedures has no bearing on whether the employee’s conduct violated standards the employer had a reasonable right to expect or whether any such violation is serious.” Since Vintage Place’s attendance policies were clearly stated and communicated to Stagg, the Supreme Court said that Stagg’s violations were misconduct even though Vintage Place skipped a step in its discipline process. Moreover, the record showed that Stagg was aware of the attendance policy (as well as the reasons for it), and yet failed to comply with the policy on at least five occasions.
The Supreme Court also noted that, in focusing on whether the employer followed its progressive discipline policy, the Court of Appeals seemed to be applying a breach-of-contract analysis. The Court of Appeals essentially concluded that the Vintage Place employee handbook amounted to a contract between Vintage Place and Stagg, and that Vintage Place breached the contract by not following its progressive discipline policy. The Supreme Court, however, emphasized that applying such a breach-of-contract standard is improper in the unemployment-benefits context. The focus must be on whether the employee qualifies for benefits under the terms of the statute.
What this Means for Employers
Although the Minnesota Supreme Court’s decision makes clear that the focus in unemployment-benefits cases should be on the employee’s conduct, not on the employer’s discipline policy, employers should still exercise caution when crafting their discipline policies. Employers should ensure that they retain discretion over when employees will be disciplined, the type or manner of discipline, and how to discipline.
If employers include specific discipline steps in their employee handbooks, it remains important to follow the steps when dealing with employee issues and to treat particular employee issues consistently. Even though failing to follow specific discipline steps when an employer has defined them or applying the discipline steps inconsistently is no longer significant in the unemployment-benefits context, failing to follow such steps or doing so inconsistently could subject the employer to other legal risks, such as claims of discrimination, retaliation, or wrongful termination. In many cases, employers may add fuel to what is, at first, a controllable employment lawsuit by failing to follow their own policies.
For more information on the subject of this article, contact the author of this article, or the Larkin Hoffman attorney who customarily handles your matters. Larkin Hoffman Daly & Lindgren Ltd. has proudly served the legal and business counseling needs of clients since 1958. The firm includes over 70 attorneys serving clients’ legal needs throughout the state, the country and around the globe. As a full-service law firm, it provides counsel and legal guidance in more than 20 areas of law to clients ranging from individuals to emerging companies and Fortune 500 corporations.
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