No. 88-242 

IPJ THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

ASHLAND OIL, INC., d/b/a SUPERAMERICA, 

Petitioner and Appellant, 

-vsDEPARTMENT OF LABOR AND INDUSTRY AND 

J,ABOR APPEALS BOARD, Agencies of the 

State of Montana, and CHARLES HYATT, 

Respondents and Respondents. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis & Clark, 

The Honorable Thomas Honzel, J~tdge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Francis X. Clinch; Jardine, Stephenson, Rlewett and 

Weaver, Great Falls, Montana. 

For Respondent : 

i3- L Ann Smoyer; Smoyer, Vaznelis & Berry, Helena, Montana 

4 Karl Nagel, Dept. of Labor G Industry, Felena, Montana -. 

- in c , c,> 

LL Submitted on Briefs: Sept. 9, 1988 

Decided: December 5, 1988 

Clerk 
Mr. Justice 11. C. Gulbrandson delj-vered the Opinion of the 

Court. 

Appellant Ashland Oil, Inc. (Ashland) appeals a 

decision from the First Judicial District, Lewis and Clark 

County, awarding unemployment benefits to the respondent on 

the basis that the respondent's actions did not constitute 

misconduct within the meaning of the law. We reverse. 

Charles Hyatt was employed by Ashland as an assistant 

manager at its SuperAmerica store in Helena, Montana, from 

March 1, 1986 to February 12, 1987. One of Hyatt's duties as 

assistant manager included the recording of non-sufficient 

fund checks (NSF) returned by banks. On two separate 

occasions in or around June of 1986, Hyatt notified the store 

manager when other employees had checks returned. 

In August of 1986, Hyatt ordered some sporting goods 

equipment for his personal use through one of the store's 

suppliers. This was an accepted practice, and employees who 

took advantage of the practice were expected to pay for the 

merchandise when it arrived. However, Hyatt did not have 

sufficient funds to pay for the equipment he ordered, so the 

amount was billed to the store. This amount went unpaid 

until an internal audit in December, 1986 revealed the fact 

Hyatt still had not paid for the goods. The store required 

Hyatt to pay for the goods and gave him a written warning. 

In November of 1986, Hyatt's bank began returning his 

personal checks because of insufficient funds in his account. 

Between November 13, 1986 and. the end of December, 1986, 

Hyatt issued four checks to Ashland. These NSF checks were 

written to pay for gas and merchandise and to obtain cash. 

Hyatt recorded the amounts of these checks on the NSF ledger 

he maintained for his employer. However, the ledger did not 

list the name of the person issuing the check. Hyatt was 
notified by both his bank and Check-Rite, Ashland's check 

collection agent, of these returned checks. These checks 

amounting to $220 were finally paid in late December, 1986. 

From December 28, 1986 to February 5, 1987, Hyatt wrote 

seven more NSF checks to his employer, amounting to a total 

of approximately $119. Both the bank and Check-Rite again 

notified Hyatt of each returned NSF check. Check-Rite set up 

a payment schedule to help Hyatt repay the amounts, but he 

failed to meet this schedule. Each Friday he promised to 

come in the next week and pay the amount owing. Finally on 

February 12, 1987, Check-Rite notified Hyatt's supervisors of 

their problem with him. When Hyatt came in to pick up his 

check that day, he was confronted with the information. He 

informed his supervisors that he was on his way to pay for 

the checks. When he returned from Check-Rite, he met with 

his supervisors. At the conclusion of that meeting, Hyatt's 

employment was terminated. 

Hyatt filed for unemployment benefits, but his employer 

objected to the payment of said benefits. Following a 

hearing on April 6, 1987, the Appeals Referee found Hyatt's 

conduct did not constitute misconduct within the meaning of 

the law and awarded benefits. The Board of Labor Appeals and 

the District Court both affirmed the findings. 

Ashland raises the following issues for our review: 

1. Did the District Court err in determining whether 

Hyatt committed misconduct on the basis of his employer's 

conduct? 

2. Did the District Court err in holding that Hyatt's 

issuance of NSF checks to his employer did not constitute 

misconduct, even though his conduct violated a Montana 

criminal statute? 
3. Did the District Court err in holding that Hyatt' s 

admitted violation of the policy of his employer did not. 

constitute misconduct? 

4. Did the District Court err in holding that Hyatt 

did not breach his fiduciary duty by issuing NSF checks to 

his employer? 

Section 39-51-102, MCA, contains the declaration of 

state public policy with regard to unemployment benefits. In 

subsection (3) of the statute, the legislature provides that. 

unemployment benefits are "[tlo be used for the benefit of 

persons unemployed through no fault of their own. " Section 

39-51-102(3), MCA. The code further provides employees ma:,' 

be disqualified for unemployment benefits when their 

discharge is due to "misconduct connected with the 

individual's work or affecting the individual's 

employment. . . " Section 39-51-2303(1), MCA. Misconduct is 

defined in § 24.11.418, A.R.M. as: 

Conduct on the part of the employee 

evincing such willful or wanton disregard 

of an employer's interest as is found in 

deliberate violations or disregard of 

standards of behavior which the employer 

has the right to expect of his employee, 

or in carelessness or negligence of such 

degree or recurrence as to manifest equal 

culpability, wrongful intent or evil 

design, or to show an intentional or 

substantial disregard of the employer's 

interest or of the employee's duties and 

obligations to his employer. Mere 

inefficiency, unsatisfactory conduct, 

failure in good performance as a result 

of inability or incapacity, inadvertences 

or ordinary negligence in isolated 

instances, or good faith errors in 

judgment or discretion are not to be 

deemed "misconduct" within the meaning of 

the statute. (Gaunce v. Board of Labor 

Appeals, 164 Mont. 442, 542 P.2d 1108, 

(1974), Boynton Cab Co. v. Neubeck et 
al., 237 Wis. 249, 296 N.W. Reporter 636, 

(1941) 1. 

When reviewing a Board of Labor Appeals1 decision 

awarding or denying unemployment benefits, the courts are 

governed by § 39-51-2410(5), MCA. 

[Tlhe findings of the board as to the 

facts, if supported by evidence and in 

the absence of fraud, shall be conclusive 

and the jurisdiction of said court shall 

be confined to questions of law. 

In the case of Jordan v. Craighead (1943), 114 Mont. 337, 136 

P.2d 526, this Court found that the evidence necessary to 

sustain the Board's findings as conclusive must be more than 

"a mere scintilla. " There must be " [s] ubstantial evidence, 

-- 'such relevant evidence as a reasonable mind might accept 

as adequate to support a conclusion. '" Jordan, 136 P.2d at 

528. Further, while the court may not consider the 

preponderance of the evidence the question of whether there 

is substantial evidence to sustain the findings is one of 

law. Jordan, 136 P.2d at 528. 

Ashland contends in its first issue that the District 

Court erroneously examined the employer's conduct in 

discharging Hyatt to determine whether or not Hyatt was 

eligible for unemployment benefits. The District Court found 

Ashland's disciplinary policy was unclear and that its normal 

procedure of giving an employee two written warnings was not 

followed. This Court has previously upheld the Board of 

Labor Appeals1 examination of conduct, policies and motives 

of an employer. See Gaunce v. Board of Labor Appeals (1974), 

164 Mont. 445, 524 P.2d 1108; Connolly v. Montana Board of 

Labor Appeals (Mont. 1987), 734 P.2d 1211, 44 St.Rep. 587. A 

reviewing body should remain primarily focused upon whether 

or not the employee's actions constitute misconduct, keeping 

in mind that when the employer allows or condones other 
instances of similar conduct, the activity may lose the 

stigma of misconduct under those circumstances. 

The record in this case shows Ashland's policy on bad 

checks was to allow an employee to pick up the check and 

avoid the Check-Rite fee on the first occurrence. On the 

second occurrence an employee had to "deal" with Check-Rite. 

While it is unclear at what point or number of bad checks an 

employee would be discharged, it is clear the employer 

discouraged this conduct and expected the employee to 

reimburse the employer for the NSF check when the employee 

became aware of it. Yet, Hyatt issued eleven NSF checks to 

his employer over a three month period and allowed them to 

remain unpaid for up to six weeks. Hyatt's actions clearly 

went beyond the conduct an employer may reasonably expect 

from its employee. See S 24.11.418(2), A.R.M. We do not 

find any action in the record condoning or allowing Ashland's 

employees to pass repeated bad checks without paying for them 

promptly. 

The second issue raised on appeal is whether an 

employee's violation of a criminal statute will constitute 

misconduct as a matter of law, thus prohibiting unemployment 

benefits. 

The Legislature of this state has determined that the 

issuing of bad checks is a criminal offense. Section 

45-6-316, MCA. In making this determination the Legislature 

requires that the person knowingly issued the bad check. 

However, realizing the inherent difficulty involved in 

determining whether or not a person "knowingly" issued the 

check, subsection (2) states that the "failure to make good 

the check or other order within 5 days after written notice 

of nonpayment has been received by the issuer is prima facie 

evidence that he knew that it would not be paid by the 

depository." Section 45-6-316(2), MCA. 
Hyatt admitted at the Appeals hearing that he knew he 

was incapable of maintaining a checking account without 

writing NSF checks. He further stated, however, that he did 

not know when he wrote the checks at issue that his account 

contained insufficient funds. Because of this claimed lack 

of knowledge, the Appeals Referee, Board of Labor Appeals and 

the District Court, all erroneously found Hyatt should not be 

denied unemployment benefits. 

Section 24.11.430, A.R.M. provides that an employee's 

violation of law while acting outside of the scope of his 

employment may or may not disqualify a claimant for benefits. 

To disqualify an individual, the matter must "impact or 

affect the ability of the employee to perform his job duties 

or substantially injure the employer's ability to do business 

I1 ... Here, Hyatt issued eleven NSF checks, amounting to over 

$300 during a three-month period, to his employer's place of 

business in violation of S 45-6-316, MCA. Further, when 

Hyatt was notified to make payment by both the bank and 

Check-Rite, he took up to six weeks to pay the amounts owj-ng 

on the checks. 

It is clear from the evidence presented that Hyatt's 

ability to perform his job as assistant manager was affected. 

Prior to when he began issuing the checks he had notified his 

employer when other employees had checks returned. Hyatt 

knew without being told by his supervisors that they should 

be notified when an employee abused their privilege of 

writing checks at the store. However, when he had checks 

returned he neither notified his supervisors of the problem 

nor corrected the problem in a timely manner. In his 

position he was solely responsible for receiving the notices 

from Check-Rite and "logging" the amounts on a ledger which 

was submitted to the area manager each month. 
The Administrative Rules of Montana in SS 24.11.418 

through .431 identify and define examples of misconduct which 

warrant denial of unemployment benefits. Example "C" in 

S 24.11.420, A.R.M., on dishonesty provides an example of a 

violation of law constituting misconduct sufficient to deny 

benefits. In that example, a motel maid, charged with 

several counts of criminal theft of a motel guest's property, 

admitted taking the property and offered to return it. Her 

employer dismissed her. The rules state this act of 

misconduct was sufficient to deny the employee benefits. 

Here we also have an employee committing repeated acts 

at the employer's place of business, directly adverse to the 

employer's interests. The employee admits having written the 

checks, having received notice that the bank did not honor 

the checks and that despite repeated demands he failed to pay 

for the checks for up to six weeks. These repeated 

violations of law, directly adverse to the employer's 

interests, constitute misconduct as a matter of law 

sufficient to deny the discharged employee unemployment 

benefits. 

Appellant's third issue concerns whether the District 

Court erred in holding Hyatt's admitted conduct in violating 

his employer's policy did not constitute misconduct. The 

District Court found Ashland would allow an employee two NSF 

checks, but found the record was unclear on "whether a third 

offense would result in the employee's discharge." The court 

stated, 

[slince Ashland had been so casual in the 

past about permitting employees to bounce 

checks, it is difficult to characterize 

Hyatt's behavior as a "willful or wanton 

act which demonstrates a disregard of the 

employer's interest." 
We disagree. 

In his discharge statement signed February 18, 1987, 

Hyatt acknowledged he had received one written warning 

relating to the reason for his discharge, that he was 

discharged for violation of a company rule or policy, that he 

actually violated that rule or policy, that he was aware of 

the rule or policy when he violated it, and that the rule or 

policy was contained in a handbook. The handbook was not 

made a part of the evidence before the Board, but other 

evidence showing Hyatt's awareness of the policy was 

introduced. 

In his duties as assistant manager, Hyatt had notified 

the store manager when other employees had checks returned 

NSF. He admitted that when he had notified the store manager 

of other employees' NSF checks, he was told the company did 

not want their employees to make a habit of this type of 

behavior. Also, when asked at the hearing before the Appeals 

Referee what he thought would happen if his NSF checks were 

reported to his supervisors, Hyatt replied "[they] probably 

would have thrown me out." 

The most significant evidence regarding Hyatt's willful 

disregard for his employer's policy was the fact he allowed 

the checks to go unpaid for such long periods on two separate 

occasions. When an employee floats a large number of checks 

on his employer for long periods of time he clearly exhibits 

a willful disregard of the employer's interest. Such actions 

show a willful disregard for the "standards of behavior which 

the employer has the right to expect of his employee . . ." 

and warrant a denial of unemployment benefits. 

5 24.11.418 (2), A.R.M. 

Appellant's fourth issue is whether the District Court 

erred in finding Hyatt did not breach his fiduciary duty to 

his employer by issuing the bad checks at his employer's 
place of business. Having previously found Hyatt should be 

denied unemployment benefits, we find we need not address 

this issue. 

We find Ashland did not allow or condone conduct of the 

extent Hyatt exhibited; Hyatt's conduct was misconduct as a 

matter of law; and by Hyatt's admitted awareness and 

violation of his employer's pol-icies and his willful 

disregard for his employer's interests, Hyatt can only be 

found to have caused his own termination and unemployment 

benefits should have heen denied. / 

,' 

Reversed. 

We concur: 
Mr. Justice William E. Hunt, Sr., dissenting. 

I dissent. The majority has set forth their dislike for the 

practice of bad check writing. This dislike will be applauded by 

reasonable people the world over and I join in that applause. But 

I cannot agree with the majority's apparent holding that all those 

who write checks without sufficient funds in the bank are unable to 

perform their jobs as "a matter of law." 

Even Ashland Oil, the employer, did not go that far. Its 

area manager said, "I could have accepted one or two returned 

checks. There would have been no problem. I've seen employees 

return checks before. It's excusable. It's human error." The 

employer, in fact, gave a letter of reference to the employee, and 

while it was less than glowing as to his management skill--"until 

he gains some additional experience and maturityw--the letter of 

recommendation did point out that Hyatt was a "very good 

worker . . . whose determination, hard work and initiative, will be 

of value to him and his future employer." 

The hearing examiner who heard the case did not find that 

Hyatt was discharged for misconduct within the meaning of the 

Montana Unemployment Insurance law. The Board of Labor Appeals 

upheld that finding. The District Court reviewed the file and 

after a full and complete discussion of the law and facts 

concluded, in the Language of the rule, that " [tlhe statutor:~ term 

misconduct shall not be literally applied so as to operate as a 

forfeiture except in clear instances of willful or wanton 

misconduct by the claimant which affects the employer's interest." 

S 24.11.418(6), A.R.M. The District Court upheld the Board of 

Appeals and this Court should do the same. Writing a check without 

knowledge of sufficient funds is not a wholesome practice. It does 

not, however, constitute misconduct as a matter of law within the 

meaninq of the Montana Tlnemployment Insurance act. 

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