Opinion
Civil Action No. 99A-09-003.
Date Submitted: March 22, 2000.
Date Decided: June 28, 2000.
Appeal from decision of Unemployment Insurance Appeal Board — Reversed and Remanded.
Dean A. Campbell, Esquire, Moore Rutt, P.A., Georgetown, Delaware, Attorney for Appellant, Federal Street Financial Services.
Neil F. Dignon, Esquire, Brown, Shiels, Beauregard Chasnov, Georgetown, Delaware, Attorney for the Appellee, Mary Davies.
MEMORANDUM OPINION
This action is presently before the Court on appeal from a decision by the Unemployment Insurance Appeals Board ("Board") granting unemployment insurance benefits to the Appellee, Mary Davies ("Claimant"). The Appellant, Federal Street Financial Service ("Employer"), appeals this decision on the grounds that the Board committed various errors of law in reaching its decision.
In general, the Employer argues that the Claimant was aware that her work performance was unsatisfactory and that particular incidents and episodes of poor judgment constitute "just cause" for purposes of disqualifying the Claimant from receiving unemployment insurance benefits. Specifically, the employer argues that:
1. No final warning that termination was imminent was required;
2. The Claimant's conduct was willful or wanton and violated the employer's interest, the employee's duties, and the employee's expected standard of care; and
3. The Claimant's arguably disparaging comment before a potential client was a willful or wanton act in violation of the employer's interest.
The Claimant, however, argues that inadvertent lapses in performance by an employee cannot be considered willful or wanton conduct contrary to the employer's interest. Moreover, the Claimant asserts that the Board was correct in finding that she was entitled to a final warning prior to her dismissal.
STATEMENT OF FACTS
Federal Street Financial Service is a small financial services and investment brokerage firm owned and operated by Holly Smith. The Claimant was Smith's personal assistant and only employee.
Smith opened the firm in September, 1997, and initially, the Claimant worked as a part-time employee in the office. In November of that year, the Claimant was hired as a full-time employee. The Claimant's duties are fully documented in the record. Record at 55. From this list, it appears that they consisted of a wide variety of tasks running the gamut from paying the office bills to completing paperwork required by the regulatory authorities.
Upon the completion of her first full year of service with the firm, in November, 1998, the Claimant received a written performance appraisal. This appraisal reflected that the Claimant met or exceeded Smith's expectations in all areas except one. In the section titled "Quality," the Claimant received a rating of"marginal." In the comments area, Smith stated: "This is [Claimant's] weakest area. She needs to further develop the art of identifying errors and inconsistencies. She needs to slow down on some projects and take time to proofread carefully." The Claimant signed this appraisal.
In the first Quarter of 1999, the Claimant's work performance continued to deteriorate and on March 11, 1999, Smith met with her to express concern with the repeated inaccuracies in her work. When the work-product did not improve, Smith presented the Claimant with a letter dated March 29, 1999, that documented and enumerated the many errors the Claimant had made since January 1, 1999. This letter served as the foundation for a meeting between the two on March 31, 1999. Most of the errors documented in this list evince a careless or sloppy attitude towards turning out an error-free work product. See Record at 52. According to the Employer, these errors continued after the March 31st meeting. See Record at 4. Moreover, the Employer asserts, and the Referee found, that the Employer discussed these errors with the Claimant each time they arose. See Record at 13.
In early June, 1999, two incidents occurred that fall somewhat outside of the usual "careless" errors of before. The Employer appears to have been responsible for the preparation of the local Chamber of Commerce's federal tax returns. The Claimant presented the Chamber file to Smith for completion thinking that the return was due on June 15, 1999. In reality, however, the return had been due on May 15, 1999. The employer attributed this to the Claimant's having misfiled the file in the "tickler system" and stated that the Claimant had "highlighted" the correct due date on one of the forms. The Employer also asserts that the Chamber, and indirectly the Employer, are now subject to penalty for this error.
The second incident involves a statement made to Smith by the Claimant while Smith was with a representative of Score, an organization that provides services to local businesses. At the end of the workday, the Claimant stopped by Smith's office to say she was leaving for the day. Smith acknowledges that this was proper. However, before leaving, the Claimant also stated, in the presence of the visitor, that she had not paid some bills that day because there were insufficient funds in the account and that she would send them out on Monday.
On June 14, 1999, Smith informed the Claimant that she no longer needed her services and had hired a replacement. In prior proceedings there appeared to be some contention of whether the Claimant was discharged and when it was effective. At this point, however, the Employer has stipulated that the Claimant was dismissed on June 14, 1999. Opening Brief at 9.
NATURE AND STAGE OF PROCEEDINGS
Shortly after her discharge, the Claimant applied for unemployment insurance benefits. On June 23, 1999, the Claims Deputy found the Claimant was discharged "without cause" and awarded benefits. Record at 8. The Employer appealed and the Referee reversed the decision of the Deputy and found the Claimant was disqualified from receiving benefits because she was discharged for "just cause." The Referee determined that the repeated discussions between Smith and the Claimant concerning her mistakes should have put the Claimant on notice that her performance was sub-par and her failure to improve constituted the "willful and wanton" misconduct necessary for a finding of just cause. Record at 11-15.
The Claimant appealed the Referee's decision to the Board. The Board reversed the Referee's decision and awarded benefits. In doing so, the Board found that "knowledge that something is `not acceptable to the owner' is not equivalent to knowledge that employer intends to terminate the employee for her next mistake. . . . [T]he Board finds that she was entitled to a final warning that her job was at risk if her performance did not improve." Record at 63. The Employer now appeals the decision of the Board to this Court.
ANALYSIS
Standard of Review .
In reviewing the decisions of the UIAB, this Court must determine whether the findings and conclusions of the UIAB are free from legal error and supported by substantial evidence in the record. See Unemployment Insurance Appeal Board v. Martin, Del. Supr., 431 A.2d 1265 (1981); Ponchvatilla v. United States Postal Service, Del. Super., C.A. No. 96A-06-19, Coach, J. (June 9, 1997), Mem. Op. at 2; 19 Del. C. § 3323 (a) ("In any judicial proceeding under this section, the findings of the [UIAB] as to the facts, if supported by evidence and in the absence of fraud, shall be conclusive, and the jurisdiction of the Court shall be confined to questions of law."). In looking for "substantial evidence," the Court is looking for "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Gorrell v. Division of Vocational Rehabilitation and Unemployment Insurance Appeal Board, Del. Super., C.A. No. 96A-01-001, Graves, J. (July 31, 1996), Letter Op. at 4. Moreover, "[i]t is not the appellate court's role to weigh the evidence, determine credibility questions or make its own factual findings, but merely to decide if the evidence is legally adequate to support the agency's factual findings." McManus v. Christina Service Co., Del. Super., C.A. No. 96A-06-013, Silverman, J. (January 31, 1997), Opinion and Order at 4.
Application of the Law to the Facts .
Issues for Review . Presently before the Court are two issues of law:
1. Did the Board err as a matter of law in ruling that the Claimant was discharged without "just cause" because there was no "wilful or wanton" conduct on the part of the Claimant?
2. Did the Board err as a matter of law by finding that the Claimant was entitled to a final warning before her discharge?1. Was Claimant Discharged for "Just Cause?" An employee is disqualified from receiving unemployment insurance benefits if they are discharged for "just cause." Moeller v. Wilmington Sav. Fund Soc., Del. Supr., 723 A.2d 1177, 1179 (1999). Delaware courts have repeatedly defined "just cause" as "a wilful or wanton act in violation of either the employer's interest, or of the employee's duties, or of the employee's expected standard of conduct." Abex Corporation v. Todd, Del. Super., 235 A.2d 271, 272 (1967). See also Avon Prod., Inc. v. Wilson, Del. Supr., 513 A.2d 1315, 1317 (1986). Moreover, in this context, "wilful" has been deemed to imply actual, specific, or evil intent, while "wanton" means "heedless, malicious, or reckless, but does not require actual intent to cause harm." Boughton v. Division of Unemp. Ins., Dept. of Labor, Del. Super., 300 A.2d 25, 26 (1972).
The Unemployment Compensation statute provides that:
An individual shall be disqualified for benefits:
. . . (2) For the week in which the individual was
discharged from the individual's work for just cause in connection with the individual's work and for each week thereafter until the individual has been employed in each of the 4 subsequent weeks (whether or not consecutive) and has earned wages in covered employment equal to not less than 4 times the weekly benefit amount.19 Del. C. § 3315 (2).
In applying this law to the facts of the appeal presently before the Court, there are two types of conduct that must be evaluated. First are what I am calling the "careless errors." These include those mistakes made by the Claimant that involved mis-posting items, incorrectly completing documents and the like. I would also include the issue of the Chamber's taxes in this category. However, the incident where the Claimant discussed the state of the Employer's finances in the presence of an outsider is somewhat different from the other conduct and will be addressed separately.
In some cases, Delaware courts have ruled that "[a]lthough inadvertence may include negligence, it does not include such conduct as is designated by the term `wanton'. Nor does inadvertence mean `wilful'." Abex, 235 A.2d at 272.See also Kingswood Community Center v. Chandler Del. Super., C.A. No. 98A-05-016, Barron, J. (Jan. 19, 1999) (ORDER). However, in certain situations, "negligent performance may come to constitute `just cause' if it occurs despite warnings and is not excusable as an expected result of either the nature of the job or the ability of the employee." Delaware Administration v. Jones, Del. Super., C.A. No. 94A-04-027, Babiarz, J. (Jan. 23, 1995) (Mem. Op. at 13) (citing Hudson Transfer Constr. Co. v. Vick, Del. Super., No. 161 Civil Action 1976, O'Hara, J. (Feb. 1, 1977) (Let. Op.) aff'd without Opin., Hudson Transfer Constr. Co. v. Vick, Del. Supr., No. 78, 1977, 1978 (ORDER). See also, Kingswood at 10; American First Mort. v. Johnson, Del. Super., C.A. No. 95A-05-005, Lee, J. (Oct. 24, 1995) Mem. Op. at 5. Considering this line of authority, there is some question whether the Claimant's careless errors would fall within that zone of conduct that is wilful or wanton. Because the Board's Findings of Fact and Conclusions of Law focus exclusively on the issue of a final warning, its decision does not reflect whether the following questions were considered:
1. Did the mistakes continue despite warnings of their impropriety?
2. Are the errors excusable as an expected result of either the nature of the job or the ability of the employee?
Determinations such as these are the province of the fact finder. While the record contains some evidence relevant to both these issues, a full inquiry into their applicability is warranted for if the errors continued despite warnings and were not excusable, the Employer would have had "just cause" for dismissing the Claimant. Considering the foregoing, this matter shall be remanded to the Board so that it may make these determinations.
The Board should also determine whether the Claimant's statement that the bills had not been paid because the Employer had insufficient funds in its account was reckless, or wanton, behavior in violation of the employer's interest. The Employer was engaged in the business of investment and finance. Moreover, the Employer is a fiduciary for its clients and manages their funds. This, like banking, is an industry built on trust. Clients must trust that their accounts are in safe hands. The foundation for the trust of the Client in their financial advisor may be shaken if the Client were to learn that the investment firm had insufficient funds in its operating account to cover daily expenses. This is so even if such a deficiency has no effect on the Client's account. While there is no evidence that the outsider in Smith's office was a client, the spread of this information outside the confines of the office could have a detrimental effect on the Employer's business. To make such a statement under these circumstances may qualify as reckless or wanton conduct in violation of the employer's interest. This, in turn, could serve as the basis for finding that the Claimant was discharged for "just cause," and thus, is disqualified from receiving unemployment insurance benefits. Again, the Board, as fact-finder, is better suited to evaluate the evidence on this issue and make an initial finding.
2. Was the Claimant Entitled to a Final Warning? This Court finds that the Board erred as a matter of law by requiring that the Employer give the Claimant a final warning that her job was in jeopardy. In Delaware, "[i]f an employer consistently tolerates wilful or wanton misconduct. the employer may not be justified in firing employees without first warning them that their conduct is no longer acceptable."Moeller, 723 A.2d at 1179. There is some question as to what type of warning will suffice. Is a warning that the work is deficient sufficient or must there be an explicit warning that termination is imminent absent improvement? While there are many cases that concern warnings either as an element of the facts or as an issue in the case, this Court could locate none that expressly required a warning that termination is imminent in all situations.
In Coleman v. Department of Labor, the Court stated that, "the absence of advanced warning concerning the consequences of given acts, as opposed to notice of their impropriety, does not preclude a discharge for wilful misconduct." Coleman v. Department of Labor, Del. Super., 288 A.2d 285, 288 (1972) (emphasis original). See also Reynolds v. Independent Living. Inc., Del. Super., C.A. No. 90A-JA-1, Ridgely, J. (Aug. 7, 1990) ORDER at 4; Potts Welding Boiler Repair Co. v. Irvine, Del. Super., C.A. No. 87A-AU-3-1-AP Stiftel, J. (Feb. 29, 1988) Let. Op. at 7 ("The Court [in Coleman] did not require employer to specifically warn employee that if he drank, he would be discharged."). In Coleman the Court rejected the Claimant's argument that the Employer impliedly condoned his misconduct by taking disciplinary action that fell short of dismissal. In the present case, the record reflects that the Claimant was told of her errors and the performance appraisal and meeting in March seem to indicate the need for improvement. This, too, reflects disciplinary action that falls short of dismissal.
In Potts Welding, the Employer had given an employee permission to use the company WATS line for limited personal calls. The Employee was dismissed for grossly abusing this privilege. In that case, the Court evaluated prior "warning" cases and concluded that those requiring a warning were ones in which "the overt actions of the employers lulled the employees into a belief" of the propriety of their actions. Potts Welding at 11. The Court went on to state that "warnings have only been required in cases involving employer acquiescence or condonation of employee behavior where due to the factual circumstances, fundamental fairness requires that the employee be warned that the employer was changing his position of acquiescence." Potts Welding at 12. The Delaware Supreme Court "gave the nod" to this reasoning by affirming "on the basis of the well-reasoned and detailed letter opinion of the Superior Court. . . ." Irvine v. Potts Welding Boiler Repair Co., Del. Supr., No. 323, 1988, Horsey, J. (Dec. 16, 1988) ORDER.
The Delaware Supreme Court has addressed this issue several times. In one case, the Court held that a final warning that termination was imminent was necessary where the employer had previously tolerated, without complaint, the conduct for which the employee was discharged. See Ortiz v. Unemployment Ins. Appeal Bd., Del. Supr., 317 A.2d 100 (1974). In Moeller, a more recent case, the Supreme Court stated that an "employer may not be justified in firing employees without first warning them that their conduct is no longer acceptable." Moeller, 723 A.2d at 1179. This still leaves open the question whether a warning that conduct is "no longer acceptable" must expressly state that termination will result or whether a warning that the employee's performance is deficient imparts that knowledge. Moeller involved an employee who received no warning at all that the conduct for which he was discharged was not acceptable. Thus, the Claimants in both Ortiz and Moeller had no reason to believe that their conduct was unacceptable and thus the Court found the conduct had been tolerated. The policy expressed in Potts Welding. supra, is consistent with these cases.
This Court must decide whether Delaware law requires that all employees be given a final warning that explicitly states that termination will result if the misconduct continues even though the employee has been notified that her performance does not meet her employer's standards. I conclude that is not the present state of the law. Where an employee has received a written performance appraisal citing the need for improvement, numerous verbal warnings, and a written list of unacceptable acts, that employee cannot argue that he or she was "blind-sided" by a pink slip. Ortiz, Moeller, Coleman and Potts Welding stand for the proposition that employees are entitled to some notice that their performance is unacceptable before being discharged. This warning need not expressly state the ultimate consequences but must give notice of the impropriety of the acts. Moreover, the corollary to this is that a employer will be found to have tolerated certain behavior where an employee has not been apprized of its impropriety.
In the present case, the Claimant will have a difficult time showing that the Employer tolerated either her "careless errors" or her statement concerning the account. There is evidence in the record that the Claimant was told of the impropriety of making such errors and was aware that she must improve. Moreover, it would be blinking at reality to believe that an employee would think that the continued occurrence of such errors would not have serious repercussions, including discharge. The Claimant also can make no real argument that the Employer tolerated her imprudent statement concerning the state of the Employer's finances because the record contains some evidence that this act was a significant factor in the Employer's decision to replace the Claimant. Because this particular act was a discrete event and not ongoing, and because there is no evidence of a prior occurrence of a similar conduct that was tolerated, no warning was necessary.See Avon, 513 A.2d at 1317.
CONCLUSION
Because the Board committed errors of law, this Court reverses the decision of the Board and remands the case to the Board for further proceedings consistent with the rule of law as clarified above. On remand, the Board should consider: (1) whether the "careless errors" occurred despite warnings of its impropriety, and (2) whether the conduct was excusable as a result of the nature of the job or the ability of the employee. The Board should also determine whether the statement concerning the account in the presence of a visitor rises to the level of wilful or wanton conduct in violation of the employer's interest.
IT IS SO ORDERED.