Opinion
Nos. 60266-7-1; 60264-1-I.
May 12, 2008.
Appeals from a judgment of the Superior Court for King County, No. 06-2-31234-1, Linda Lau, J., entered June 8, 2007.
Affirmed by unpublished opinion per Cox, J., concurred in by Dwyer, A.C.J., and Appelwick, J.
Cooper Dubois and Mike Tse, former employees of Blue Frog Mobile, Inc. (BFM), appeal the decisions of the Commissioner of the Employment Security Department denying them unemployment benefits. They both claim that certain findings of fact in the decisions of each of their cases are not supported by substantial evidence. Moreover, they challenge certain conclusions of law in those decisions. We disagree with both contentions and affirm.
BFM is a mobile entertainment, media, and content company. It sells mobile content, including ring tones, wallpapers, and text services to customers with wireless cell phones. BFM operates offices in the United States and Manila, the Philippines.
Dubois' and Tse's duties for BFM included designing graphics for print advertising and websites.
While working at BFM, Dubois, Tse, and others launched a side business that offered graphic design services. The new company was called needtothink.com.
BFM discharged both of them on March 13, 2006.
Thereafter, Dubois and Tse applied for unemployment insurance benefits. Following investigation, the Employment Security Department (Department) denied Dubois' request. However, it approved Tse's request.
Dubois sought review of the Department's decision denying him benefits. Likewise, BFM sought review of the Department's decision granting benefits to Tse. An administrative law judge (ALJ) set aside the decision denying Dubois' benefits, concluding that BFM failed to establish that he was terminated for work-related misconduct. The ALJ affirmed the Department's decision awarding Tse benefits on the same basis.
BFM sought review of both decisions. The Commissioner adopted all except four of the ALJ's findings of fact and all except four of the conclusions of law in the decision regarding Dubois. Moreover, the Commissioner made additional findings and conclusions for this decision, concluding that Dubois was disqualified from receiving benefits because of work-related misconduct.
Similarly, the Commissioner adopted all except four of the ALJ's findings of fact, and all except three of the conclusions of law regarding Tse. The Commissioner also made additional findings and conclusions for the decision, concluding that Tse was disqualified from benefits for misconduct connected with his work.
Dubois and Tse both appealed the Commissioner's decisions. The King County Superior Court affirmed.
Dubois and Tse both appeal. We consolidated these appeals for decision.
DISQUALIFYING MISCONDUCT
Dubois and Tse contend that the record does not support the Commissioner's determinations that they were dismissed for work-related misconduct. We disagree.
Judicial review of a decision made by an Employment Security Department commissioner is governed by the Washington Administrative Procedure Act (WAPA). In reviewing the decision, we apply the standards of the WAPA directly to the administrative record before the agency. Relief from an agency decision is granted when the agency has erroneously interpreted or applied the law, the order is not supported by substantial evidence, or it is arbitrary or capricious.
Tapper v. Empl. Sec. Dep't, 122 Wn.2d 397, 402, 858 P.2d 494 (1993).
Id.
RCW 34.05.570(3)(d), (e), (i).
A person discharged "for misconduct connected with his or her work" is disqualified from receiving unemployment benefits. Whether an employee's conduct constitutes misconduct is a mixed question of law and fact.
Barker v. Empl. Sec. Dep't, 127 Wn. App. 588, 593, 112 P.3d 536 (2005).
We review findings of fact to determine whether they are supported by substantial evidence. To the extent the commissioner modifies or replaces findings by an administrative law judge, we review the commissioner's findings. Using this approach, we give the agency's factual findings the proper level of deference to which they are entitled under the circumstances. Unchallenged findings are verities on appeal.
Id. at 592.
Id. at 592-93.
Id. at 593.
Fuller v. Empl. Sec. Dep't, 52 Wn. App. 603, 606, 762 P.2d 367 (1988).
The application of law to the facts is a question of law that we review de novo.
Barker, 127 Wn. App. at 593.
We consider a commissioner's decision to be prima facie correct. The party challenging the agency's action bears the burden of demonstrating its invalidity.
We turn first to the examination of the challenged findings in each of the Commissioner's two decisions to determine whether they are supported by substantial evidence.
Dubois Findings of Fact
Dubois challenges Additional Finding of Fact I of the Commissioner. That finding states:
Dubois assigns error to numerous findings and conclusions. We only address those that are dispositive and need not address the rest.
The employer discharged the claimant for violating his employment agreements, including his promise not to compete, share confidential information with others, or use the employer's resources for another business. The employer felt there was a need for these agreements because of the highly competitive nature of its business. The employer performed services such as direct to consumer marketing for mobile and land line telecommunicating services. The claimant's job as a graphics designer was to create brand identity creations, print creations, web site creation and design, and create mock-ups for future endeavors. The employer was persuaded that the claimant had violated these employment agreements because of e-mails the employer discovered on or before March 13, 2006.
Dubois Commissioner's Record at 176.
Dubois also challenges Additional Finding of Fact V. That finding states:
The employer determined, at the time of the discharge, that the claimant was violating the "Confidential Information, Invention Assignment, and Arbitration Agreement["] executed by the parties, as well as the Employee Handbook. In particular, the employer determined that the claimant had violated section 1(a), which defines and prohibits the disclosure of employer confidential information. The employer also concluded the claimant had violated the contractual provisions contained in 2(a) and (b), which define and prohibit the disclosure of company "inventions".[sic] The employer further believed the claimant had violated contractual provision 3, which defines and prohibits conflicting employment. The e-mails demonstrate that the claimant violated those provisions, and the evidence produced by the employer which it discovered after the separation further corroborates and supports the employer's understanding at the time of the discharge triggered by its discovery of the e-mails.
Dubois Commissioner's Record at 177-78.
Dubois argues that these findings are not supported by substantial evidence because he did not engage in work directly related to BFM business. Specifically, Dubois contends that because needtothink.com offered graphic design services while BFM sold and marketed content and services for mobile phone consumers, the two companies were not in competition with one another. He also argues that he did not engage in work in conflict with his obligations to BFM and that his work at BFM did not suffer as a result of his side venture.
We conclude that substantial evidence supports both findings. The record contains the BFM Confidential Information, Invention Assignment, and Arbitration Agreement, which Dubois signed on Aug. 2, 2005. In section (3), Dubois agreed to the following:
I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation or consulting directly related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.
Dubois Commissioner's Record at 151 (emphasis added).
It is uncontested that BFM provides mobile entertainment and content services and products.
Moore, BFM's representative at the administrative hearing, testified that BFM discharged Dubois for violating the Confidential Information and Invention Assignment Agreement dated August 2, 2005 ("August 2 agreement"). Specifically, Moore testified that Dubois' activities violated the conflicting employment provision, which is at section (3) of the document that he signed.
BFM based its belief on e-mails it took from Dubois' computer and reviewed before terminating Dubois on March 13. These e-mails are part of the record before us. For example, the subject line of one e-mail contained the words "Codename Pink Turtle," which Moore interpreted to indicate a similarity to BFM. The same e-mail outlined a plan for launching a new company, which involved Phil Runyan, a former BFM employee who was fired several weeks earlier. The e-mail indicated that the new company had secured its first client, Globe7. This also concerned Moore because BFM had a client, Globe, a wireless telecommunications company in the Philippines. Another e-mail, sent by Runyan to Dubois during work hours, described Globe7's needs. The e-mail asked for "banners" and "anything direct to consumer," and instructed, "send banners that Manila did as well." Phrases like "direct to consumer" suggested to Moore that this new venture provided design services to companies competing with BFM. Another e-mail, also from Runyan, referenced marketing language expertly used by BFM: "FREE, FREE, FREE." Yet another e-mail proposed "100 minutes free" as a potential marketing strategy for one of needtothink.com's clients.
Moore testified that BFM was concerned that information Dubois learned from BFM could be used to promote the products and services of competing telecommunications companies. The terms appearing in these e-mails show that needtothink.com offered telecommunications design and marketing. This type of design work, which Dubois performed for the new venture, was directly related to BFM's business to advertise its own services directly to consumers.
The Commissioner was entitled to decide from this and other evidence that the new company was involved in work that was directly related to BFM's work. Complete overlap of work of the two businesses was not required.
Moreover, BFM stated to the Department that Dubois' work for the new entity, some of which was done during BFM time, prevented him from working on BFM projects. Moore also testified that the reason for Dubois' discharge was his use of "company resources, company material on company time to create what was believed to be . . . a competing business. . . ."
Dubois Commissioner's Record at 42.
The Commissioner was also entitled to decide from this and other evidence that Dubois used BFM time and resources for his new company, which conflicted with his obligations to BFM.
Dubois next challenges Finding of Fact 12 by the ALJ and Additional Finding of Fact VI by the Commissioner.
Finding of Fact 12 states:
The claimant conduct that the employer suspected was harmful to the employer. More particularly, the employer asserted that the claimant was using employer time and resources to conduct a private business. In addition, starting a company with Mr. Runyan conflicted with the employer's interests and hurt employer morale. Further, the employer was represented as a client. Finally, employer designs, which were corroboratively created, were represented as the work of the claimant and/or his partners.
Dubois Commissioner's Record at 159-60.
Additional Finding VI states:
The claimant's conduct which gave rise to the discharge was harmful to the employer, in particular starting a company with Mr. Runyan without first consulting the employer to discover if the employer would object, and conflicted with the employer's interests and hurt employer morale.
Dubois Commissioner's Record at 178.
These challenged findings contain both findings of fact and conclusions of law. We reserve the legal question of whether Dubios' conduct was harmful to BFM for discussion later in this opinion. However, we conclude that substantial evidence supports the relevant factual portions of Finding of Fact 12 and Additional Finding of Fact VI.
Here, Moore testified that BFM terminated Dubois for using company resources on company time to create what it believed to be a competing business. Moore also testified that BFM recently fired Runyan and that his departure was "not a clean one." Moore testified that staff knew Runyan was not welcome.
Dubois testified that he entered into a side business with Runyan without discussing it with BFM management.
Tse Findings of Fact
Tse challenges the Commissioner's Additional Finding of Fact IV. Additional Finding of Fact IV states:
Tse assigns error to numerous findings and conclusions. We only address those that are dispositive, and need not address the rest.
The e-mails which triggered the employer's decision to discharge the claimant, which were discovered on or before March 13, 2006, indicated that the claimant and others were starting a company that might compete with the employer, or might service companies that competed with the employer. Upon review of the e-mails the employer believed that the claimant and/or others were using employer owned and copyrighted design materials as well as other employer property to secure prospective clients. The employer also believed that the claimant was performing the same or similar services for this new company that he performed for the employer, and that some of this work was performed on company time. The employer believed that the conduct violated the "Confidential Information, Invention Assignment, and Arbitration Agreement" executed by the parties, as well as the Employee Handbook.
Tse Clerk's Papers at 181.
We conclude that substantial evidence supports this finding.
Here, the record contains BFM's Confidential Information, Invention Assignment, and Arbitration Agreement, which Tse signed on July 29, 2005 ("July 29 agreement"). The language of Tse's agreement is identical to the one Dubois signed. Section (3) provides:
I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation or consulting directly related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.
Tse Commissioner's Record at 149 (emphasis added).
Moore, who also represented BFM at Tse's hearing, testified that Tse was fired for creating a graphic design business that offered web design for Internet companies and possible competitors of BFM. Moore alleged that this conduct violated the Confidential Information, Invention Assignment, and Arbitration Agreement.
BFM offered the same e-mail evidence against Tse that it offered in Dubois' hearing.
In addition, BFM stated to the Department that Tse did not do his work for BFM due to using time and resources for outside projects. Moore testified that Tse also used company time and resources for the new venture. One e-mail that Tse sent to Runyan for the benefit of a needtothink.com client indicated that the attached graphic included "a pic I grabbed off istock." At Dubois' hearing, Moore testified that Tse's e-mail was a direct reference to using BFM's corporate istock account for needtothink.com purposes.
Moore also testified that Tse knew about the negative situation surrounding Runyan's termination because BFM held an employee meeting on the subject following Runyan's termination.
The Commissioner was entitled to decide from this and other evidence that Tse's work with needtothink.com directly related to BFM's business and violated Tse's obligations to his employer.
Tse next challenges Additional Finding of Fact VII. That finding states:
The claimant's conduct was harmful to the employer. Starting a company with Mr. Runyan conflicted with the employer's interests and hurt employer morale. Further, the behavior of the claimant in engaging in such a side venture broke the trust necessary for an employer to have in its employees.
Tse Clerk's Papers at 181.
We conclude that substantial evidence supports the relevant factual portions of this finding. We address the legal question of harm later in this opinion.
At the hearing, Moore testified that Tse used company networks and resources for non-company purposes. He also testified that starting a company with Runyan, who Moore alleged had damaged BFM, was "detrimental to morale." Moore also testified that Tse violated the conduct BFM expected of its employees by violating employee agreements and policies.
Tse testified at the hearing that he was involved in a side graphic design business and that he received and monitored his personal e-mail at work.
Conclusions of Law
Dubois and Tse argue that the Commissioner incorrectly applied the law to conclude that they were discharged for misconduct related to their work. We disagree.
Under the Employment Security Act, "misconduct" includes, but is not limited to, the following conduct:
(a) Willful or wanton disregard of the rights, title, and interests of the employer or a fellow employee;
(b) Deliberate violations or disregard of standards of behavior which the employer has the right to expect of an employee. . . .
RCW 50.04.294(1)(a)-(b).
Examples of misconduct include:
(f) Violation of a company rule if the rule is reasonable and if the claimant knew or should have known of the existence of the rule. . . .
Regulations interpreting these provisions provide:
(4) A company rule is reasonable if it is related to your job duties, is a normal business requirement or practice for your occupation or industry, or is required by law or regulation.
The action or behavior resulting in discharge must be work related to constitute misconduct. Conduct is connected with one's work if it results in harm or creates the potential for harm to the employer's interests. This harm may be tangible or intangible, such as damage to the employer's reputation or a negative impact on staff morale.
Id.
Applying these statutory requirements to the facts is a question of law that we review de novo.
Barker, 127 Wn. App. at 593.
Dubois
Finding of Fact 12 and the Commissioner's Additional Findings of Fact I, V, and VI support our conclusion that BFM discharged Dubois for misconduct related to his work.
Relevant portions of these findings support our legal conclusion that Dubois willfully disregarded the interests of BFM, which constitutes misconduct under the Act.
See RCW 50.04.294(1)(a)-(b).
By violating the August 2 agreement, Dubois disregarded BFM's expectation that he would not engage in conflicting employment while employed by BFM. In doing so, Dubois violated a "company rule" related to his job.
We also conclude that Dubois' conduct created the potential for harm and may have harmed BFM's interests, satisfying the statutory requirement that disqualifying misconduct be work related.
See WAC 192-150-200(1)-(2).
Dubios' conduct deprived BFM the right to operate its business with a workforce dedicated to its interests and not engaged in conflicting employment. Dubois also misused company time and resources. Moreover, we conclude that Dubois' business association with Runyan clearly conflicted with BFM's interests and may have harmed employee morale.
Tse
Applying the law to the facts of Tse's case, we also conclude that BFM discharged Tse for misconduct related to his work.
Relevant portions of the Commissioner's Additional Findings of Fact IV and VII support our legal conclusion that Tse willfully disregarded the interests of BFM, constituting misconduct under the Act. When Tse violated the July 29 agreement, Tse violated a "company rule" related to his job.
See RCW 50.04.294(1)(a)-(b).
In the same manner as Dubois' conduct, Tse's conduct also created the potential for harm and may have harmed BFM's interests, satisfying the statutory requirement that disqualifying misconduct be work related.
See WAC 192-150-200(1)-(2).
Dubois and Tse contend that BFM failed to demonstrate that their conduct caused actual detriment to its operations as required by Dermond v. Employment Security Department. There, this court held that harm suffered must be more than imaginary or theoretical. To establish that conduct caused harm, the employer must demonstrate that the employee's conduct caused "actual detriment" to its operations, which is determined on the facts of each case. Harm in that case occurred where the employee violated an employer's rule, causing confusion and possible operation delays and preventing a supervisor from monitoring and coordinating the overall situation.
89 Wn. App. 128, 947 P.2d 1271 (1997).
Id. at 135-36.
Id.
Here, the harm to BFM was not imaginary or theoretical. The men's conduct impaired BFM's operations by using BFM's resources for the purposes of another company directly related to BFM's business. Moreover, their conduct impacted the morale of other employees at BFM. Further, it undermined BFM's efforts to prevent its employees from engaging in conflicting employment. Dermond is satisfied here.
Finally, Dubois and Tse contend that the Commissioner erroneously relied on evidence collected after their termination to conclude that BFM discharged them for misconduct. We reject this argument.
The record contains evidence that supports the finding that both Dubois and Tse violated their employment agreements before BFM discharged them on March 13. While the record contains evidence of post-March 13 conduct, that is not necessary to our decision here.
Attorney Fees
Dubois and Tse seek fees and costs on appeal based on RCW 50.32.160 and RCW 50.32.100, respectively.
Because we do not reverse the Commissioner's decisions, an award of fees is not warranted. Likewise, an award of costs is also unwarranted.
We affirm the Decisions of the Commissioner.