NO. 96-105 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1996 

GREGG A. HAFNER, 

MONTANA DEPARTMENT OF LABOR AND 

INDUSTRY and DUBRAY LAND SERVICES, INC., ! : 5:~; ., 

Defendants and Respondents. 

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APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable G. Todd Baugh, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Michael G. Eiselein; Lynaugh, Fitzgerald, Eiselein 

& Eakin, Billings, Montana 

For Respondents: 

Melanie A. Symons, Department of Labor & Industry, 

Helena, Montana 

Calvin J. Stacey; Stacey & Walen, Billings, Montana 

Filed: 

Submitted on Briefs: August 9, 1996 

Decided: December 10, 1996 
Justice W. William Leaphart delivered the Opinion of the Court. 

Appellant, Gregg Hafner (Hafner), appeals from the decision of 

the Thirteenth Judicial District Court, Yellowstone County, 

affirming a Board of Labor Appeals' denial of unemployment 

insurance benefits. We affirm the District Court. 

We restate the issue raised by Hafner as follows: 

Did Hafner's failure to notify his employer of a conflict 

of interest constitute misconduct for purposes of 

unemployment compensation benefits? 

BACKGROUND 

This case arises out of the Department of Labor's (the 

Department) denial of unemployment benefits to Hafner. Hafner 

appeals from the District Court's decision affirming the Board of 

Labor Appeals' (the Board) denial of unemployment benefits on the 

basis of misconduct. 

Hafner was hired by respondent, DuBray Land Services, Inc. 

(DuBray) as a Right-of-Way agent in March of 1990. As a Right-ofWay agent for DuBray, Hafner's duties included purchasing easement 

rights for various companies. In preparation of Hafner's position 

as a Right-of-Way agent, DuBray sent Hafner to a training program. 

As part of the training program, Hafner took courses in "Ethics and 

the Right of Way Profession" and "Rules of Professional Conduct." 

Additionally, Hafner was a member of the International Right of Way 

Association. The Association adheres to a Code of Ethics, Ethical 

Rules and Standards of Conduct. Ethical Rule No. 6 of the Code of 

Ethics provides in part: "Members pledge to maintain a high 

2 
professional relationship with his/her client or employer." 

Standard Two of the "Standards of Practice for the Right of Way 

Professional" provides in part: 

FULL DISCLOSURE 

Full disclosure of all pertinent information requires, 

without reservation, disclosure to the client, employer 

or public, all relevant information a member possess 

[sic] with regard to the member's employment. 

Interpretation: 

1. Full disclosure to the client/employer means 

disclosure of: 

(a) conflicts of interest (including, but not 

limited to such items as personal, financial, emotional, 

employment; prior or current, or others). 

While employed by DuBray, Hafner applied for and was, on a 

probationary basis, given a job with Conoco, Inc. (Conoco). As a 

pre-requisite to employment with Conoco, Hafner underwent a 

physical examination. After receiving the results of Hafner's 

physical examination, Conoco decided to terminate Hafner's 

employment before he began working. Hafner contended that Conoco's 

decision to terminate him was discriminatory and he filed a claim 

against Conoco with the Montana Human Rights Commission. Hafner's 

civil suit against Conoco continued for several years while he 

continued to work for DuBray. 

In 1992, while the Human Rights Commission complaint was still 

pending, DuBray assigned Hafner to work on the Conoco account. 

Hafner did not advise DuBray that he had a Human Rights Complaint 

pending against Conoco. In handling the Conoco account, Hafner had 

access to Conoco's files and a Conoco checking account. Despite 

his pending civil suit, Hafner continued to work on the Conoco 

3 
account without informing DuBray of this conflict of interest. 

DuBray only became aware of the suit in December of 1994, when a 

Billings newspaper reported that this Court had reversed the trial 

court's granting of summary judgment for Conoco and remanded 

Hafner's claim for trial. Hafner v. Conoco (1994), 268 Mont. 396, 

886 P.2d 947. When it became aware of the suit, DuBray decided to 

terminate Hafner by letter dated December 28, 1994, stating as 

follows : 

Gregg Hafner 

This letter is your notice that you are terminated 

for cause from your employment with DuBray Land Services, 

Inc. effective today, December 28, 1994. You will be 

given today two checks for your net pay for salary 

through today andvacation pay accumulated through today. 

The reason for your termination for cause is that 

you are the Plaintiff in a lawsuit entitled Hafner v. 

Conoco, Cause No. 93-552 in Yellowstone County District 

Court, which lawsuit has only become known to this 

company through a newspaper article published in The 

Billings Gazette on Saturday, December 17, 1994, a copy 

of which is attached. This newspaper article was first 

delivered to me yesterday, December 27, 1994. In the 

meantime, for approximately two years you have been 

working on Conoco projects for DuBray Land Services, Inc. 

without informing the company of your lawsuit against 

Conoco. This is an untenable disregard for the interest 

of your employer and cannot be tolerated. 

By the end of work today you must have all of your 

personal belongings removed from the premises of DuBray 

Land Services, Inc. In addition, you must turn in the 

company automobile and all sets of company car keys, all 

company credit cards and telephone cards, all company 

files in your possession (those for Conoco and 

otherwise), the Conoco checkbook, all company equipment 

and supplies, and your set of keys to the company office 

building. When you have turned over this property and 

cleaned out your personal property you will be given your 

checks for salary and vacation pay. 

Thank you. 

4 
Following his termination from DuBray, Hafner filed a claim 

for unemployment benefits with the Department. Hafner's request 

was denied on the basis that he was terminated for misconduct. 

Hafner then filed an appeal with the Hoard. After determining that 

Hafner had been discharged for "misconduct," the Board denied 

Hafner's request for unemployment benefits pursuant to 5 39-51- 

2303, MCA, and § 24.11.460, ARM. Next, Hafner filed a request for 

judicial review with the Thirteenth Judicial District Courts, 

Yellowstone County. The District Court affirmed the Board's 

decision. Hafner has filed the instant appeal challenging the 

decision of the District Court's decision to affirm the Board's 

denial of unemployment benefits. 

DISCUSSION 

Did Hafner's failure to notify his employer of a conflict 

of interest constitute misconduct for purposes of 

unemployment compensation benefits? 

A District Court's review of a decision of the Board is 

limited by § 39-51-2410(5), MCA, which provides: 

In any judicial proceeding under 39-51-2406 through 39- 

51-2410, the 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 both Connolly v. Montana Bd. of Labor Appeals (1987), 226 Mont. 

201, 734 P.2d 1211, and Stine v. Western Federal Savings Bank 

(1994) I 266 Mont. 83, 87, 879 P.2d 53, 56, this Court held that the 

determination of "misconduct" in the context of an application for 

unemployment benefits "was a factual question, properly left to the 

5 
appeal's referee and the Board of Labor Appeals." Connollv, 734 

P.2d at 1215. Having reviewed this issue in the present case, we 

reverse Connollv and stine to the extent that they hold that 

"misconduct" is a question of fact and, for the reasons stated 

below, hold that the question of whether conduct rises to the level 

of "misconduct" is a question of law which this Court reviews for 

correctness. 

Misconduct is defined by § 24.11.460(l), ARM, and includes: 

(a) willful or wanton disregard of the rights, 

title, and interests of a fellow employee or the 

employer; 

(b) deliberate violations or disregard of standards 

of behavior which the employer has the right to expect of 

an employee; 

(c) carelessness or negligence that causes or would 

likely cause serious bodily harm to the employer or 

fellow employee; or 

(d) carelessness or negligence of such degree or 

recurrence to show an intentional or substantial 

disregard of the employer's interest. 

(Emphasis added.) In addition, § 24.11.461(1)(f), ARM, explains: 

(1) The followings acts are considered misconduct 

because the acts signify a willful and wanton disregard 

of the rights, title, and interests of the employer or a 

fellow employee. These acts 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 ruleL.1 

The question of whether an employee has disregarded standards of 

behavior, been careless or negligent, or violated company rules is 

a question of fact. Whether those "facts" then constitute 

"misconduct" involves interpretation and application of the 

6 
Administrative Rules of Montana and is a legal conclusion 

reviewable by this Court. 

Hafner argues that he has a constitutional right to pursue his 

discrimination claim against Conoco and that it is illegal for 

DuBray or anyone else to interfere with this claim or retaliate 

against him for exercising his right to sue. Section 49-2-301, 

MCA. His characterization of the issue presented assumes that he 

was terminated for having sued Conoco. He relies on the statement 

in the letter of termination which states: "The reason for your 

termination for cause is that you are the Plaintiff in a lawsuit 

entitled Hafner v. Conoco . .'I When that statement, however, 

is put in the context of the whole letter, it is apparent that he 

was terminated not for suing Conoco, but for failing to advise 

DuBray that he was suing Conoco while at the same time continuing 

to work on Conoco files on behalf of DuBray. Hafner also 

emphasizes that while the appeals referee labeled his conduct as a 

conflict of interest, DuBray did not. Rather, DuBray's letter 

states that Hafner's conduct was an "untenable disregard for the 

interest of your employer and cannot be tolerated." This is not a 

distinction of significance. Failing to advise an employer of a 

conflict of interest can certainly constitute a disregard for the 

interests of the employer. 

As restated, the question presented by this appeal is whether 

Hafner's failure to disclose his pending litigation against Conoco, 

while working on Conoco files for DuBray, constituted "misconduct." 

The ethical rules of a Right-of-Way agent require full 

7 
disclosure of all conflicts of interest. Hafner's failure to 

advise his employer regarding his suit against DuBray's client, 

Conoco, was a violation of company policy as well as a violation of 

his ethical duty as a Right-of-Way agent. 

The ethical rule imposed upon Hafner was reasonable. Hafner's 

employer, DuBray, was justified in expecting to be informed of 

conflicts of interest that arise between its employees and its 

clients. In addition, Hafner's training in 1990 made him fully 

aware of his obligation to reveal conflicts of interest. In 

failing to inform DuBray of his pending litigation against Conoco 

while continuing to work on the Conoco account on behalf of DuBray, 

Hafner willfully disregarded the interests of DuBray. This 

disregard of reasonable standards constitutes misconduct under 

§ 24.11.460(l), ARM. 

Hafner argues that there is no logic to holding that he could 

be fired for failing to advise DuBray of the suit against Conoco 

since: 

Like it or not, DuBray is prohibited from doing anything 

about Gregg's suit against his customer. He may not tell 

Gregg to drop the suit. He may not "suggest" that Gregg 

choose between his job and his lawsuit. We submit that 

in the complete absence of even the suggestion of any 

wrongdoing on the part of Gregg, DuBray could not even 

take Gregg off the Conoco projects, because to do so 

would seriously limit Gregg's usefulness as a DuBray 

employee and could for that reason subject him to an 

increased risk of layoff or termination. Such treatment 

would "otherwise discriminate" against Gregg and would 

amount to retaliation under the plain language of MCA 49- 

2-301. 

We agree that, if Hafner had advised DuBray of his claim against 

Conoco in a timely fashion, DuBray would not have been justified in 
firing Hafner or in having him choose between his job and his claim 

against Conoco. We do not, however, agree that DuBray could not 

have chosen to assign Hafner to non-Conoco accounts or, if he were 

already working on the Conoco account, reassign him to other 

accounts as DuBray had done with other employees. 

Hafner points out that Conoco was aware of the situation from 

the start and had no objection to his continuing to work the Conoco 

file while pursuing his claim. That fact does not, however, change 

the fact that DuBray, as the employer, had a reasonable expectation 

that it would be advised if its employee had a conflict of interest 

so that DuBray could decide how to handle the situation. Conflict 

of interest rules are designed to work prospectively; to prevent 

conflicts from causing harm to employer or client. As the District 

Court stated, Hafner's argument misses the point. The fact that, 

in retrospect, the client was not damaged or offended, does not 

justify having kept the employer in the dark. Hafner should have 

advised DuBray of this situation when it arose so that DuBray would 

have been in a position to take appropriate in-house action to 

defuse any conflict. 

Hafner argues that denying him unemployment benefits amounts 

to a denial of his constitutional right to pursue a discrimination 

claim. Specifically, Hafner maintains that his termination for 

violating an "ethical rule" infringed upon his inalienable right to 

pursue and maintain employment; a right which this Court has held 

to be necessary to enjoy one of "life's basic necessities" under 

Article II, section 3 of the Montana Constitution. In support of 

9 
his argument, Hafner cites to Wadsworth v. State (1996), 275 Mont. 

287, 911 P.2d 1165. In Wadsworth, the plaintiff claimed that a 

Department of Revenue conflict of interest rule precluding outside 

employment violated his right to pursue life's basic necessities 

contained in the Montana Constitution. Wadsworth, 911 P.2d at 

1173. This Court agreed with Wadsworth and held that the State did 

not demonstrate a compelling interest for applying the conflict of 

interest rule, thus his termination violated his constitutional 

right to pursue life's basic necessities under Article II, section 

3 of the Montana Constitution. Wadsworth, 911 P.2d at 1175. 

In contrast to Wadsworth, Hafner was not terminated for 

pursuing life's basic necessities nor is it accurate to say he was 

terminated for pursuing a discrimination claim against Conoco. 

Rather, Hafner was terminated because, without DuBray's knowledge, 

he continued to work on the Conoco account while he pursued a civil 

suit against Conoco. Hafner's access to a Conoco checking account 

and other confidential information created a conflict of interest 

of which DuBray had a right to be aware. Hafner's failure to 

disclose this conflict created a legitimate reason for DuBray to 

terminate him. We hold that DuBray had a legitimate expectation to 

be informed of the conflict of interest. Hafner's failure to 

inform DuBray of this conflict of interest constituted willful 

disregard of the interests of his employer and of reasonable 

standards of behavior which the employer had the right to expect of 

an employee. Section 24.11.460(l), ARM, and 5 24.11.461(1)(f), 

ARM. The District Court's determination that Hafner's conduct 

10 
amounted to misconduct under § 39-51-2303(l), MCA, was correct. 

Stine, 879 P.2d at 56. 

Accordingly, we affirm. 

We concur: I 

-. Justices d 

11 
Justice William E. Hunt, Sr. dissenting. 

I dissent. The majority opinion ignores the obvious and 

clearly stated reason for Hafner's dismissal and, further, 

countenances a result which the Department's own regulations would 

not allow, if they were correctly followed. 

1. The reason for Hafner's termination was his status as a 

plaintiff in a case against Conoco. 

This Court usually adheres to the general legal principle 

that, in the absence of an ambiguity, a document should be presumed 

to mean precisely what it says. We have repeatedly acknowledged 

this principle when construing contracts and statutes. See, for 

example, Carbon County v. Dain Bosworth, Inc. (19941, 265 Mont. 75, 

874 P.2d 718; Farmers Alliance Mutual Insurance Co. v. Holeman 

(Mont. 1996), 924 P.Zd 1315, 53 St.Rep. 904. Yet, for some reason, 

the majority ignores this very sensible legal rule in this case. 

The dismissal letter from DuBray to Hafner states, 

unequivocally and in plain English, “‘It1 he reason for [Hafner's] 

termination for cause is that [he is1 the Plaintiff in a lawsuit 

entitled Hafner v. Conoco. " Nothing could be clearer. The 

majority, however, goes to great lengths to attempt to show that, 

while that may be what the letter says, that is not what the letter 

means. The majority contends that "[wlhen that statement is put in 

the context of the whole letter, it is apparent that [Hafner] was 

terminated not for suing Conoco, but for failing to advise DuBray 

that he was suing Conoco . . .'I Such a conclusion is not apparent 

to me. The termination letter means no more, and no less, than 

exactly what it says : Hafner was fired because he was the 

12 . 
plaintiff in a lawsuit against Conoco. Such a firing is plainly 

illegal under § 49-z-301, MCA. 

2. There is a significant difference between an actual conflict of 

interest and a potential conflict of interest. 

The majority opinion fails to distinguish between a potential 

conflict of interest and an actual conflict of interest when the 

recognition and application of this distinction is crucial to the 

fair disposition of this case. Instead, the majority presumes the 

existence of an actual conflict of interest throughout its opinion, 

and this presumption dictates the opinion's obvious result. 

In making such a presumption, the majority perpetuates an 

error originally made by the hearings examiner, whose findings and 

conclusions were accepted without question at every level. Like 

the majority of this Court, the hearings examiner failed to 

distinguish between an actual and a potential conflict of interest, 

but instead proceeded under the erroneous assumption that the there 

is no difference between the two 

In contrast, Hafner himself distinguished between an actual 

and a potential conflict of interest and has tried without success 

to make those involved in the appeals process understand what he 

was talking about. At the hearing, Hafner testified as follows: 

Q: In any event you see and would agree with me 

that at a minimum your claim against Conoco, Inc., could 

be potentially a conflict of interest, is that correct? 

Hafner: Potentially? 

Q: Yes. 

Hafner: Yes, I'll agree with potentially. 

Q: Okay. And you don't think that it ever turned 

into a conflict of interest because you governed yourself 

so that you did the best work possible, you put to the 

side your lawsuit against Conoco, Inc., and you did the 

13 
job well and satisfactory [sic], is that a fair 

characterization? 

Hafner: That's fair. 

Hafner did not feel that his actions constituted misconduct because 

the potential conflict of interest (which he freely acknowledged 

existed) never ripened into an actual conflict of interest. As 

noted above, this is a distinction that the hearings examiner never 

addressed. Instead, the examiner found that Hafner was "discharged 

from employment for failing to disclose a potential conflict of 

interest to [his] employer." (Emphasis added). The examiner 

further concluded that this failure to disclose a potential 

conflict of interest constituted misconduct and that DuBray's 

firing of Hafner was justified because of this misconduct. 

But on its "claimant separation information" form, the 

Department itself states that "[tlo justify a finding of misconduct 

it must be shown that the matter was within the individual's 

control and the behavior must have had a direct adverse effect on 

the employer's business interests." (Emphasis added.) By this 

definition, the Department implicitly recognizes the difference 

between a potential conflict of interest, which does not directly 

adversely impact the employer's interests, and an actual conflict 

of interest, which does. In order for an employee's actions to 

constitute misconduct, the employer must show the existence of an 

actual conflict of interest which has a direct adverse effect on 

his business. 

DuBray was asked during the hearing to explain how his 

business had been impacted by Hafner's actions. He replied that 

14 . 
"we haven't done a billable hour for Conoco since [Hafner] left our 

employ." Yet there is no explanation for how or why Hafner was 

responsible for this. Asked again what business interests Hafner's 

actions affected, DuBray responded, 

It affects my, the, my agent/client relationship that I 

have, and the fact that Mr. Hafner was carrying a 

checkbook that was Conoco's checkbook, and my checkbook 

and that he had an obligation to me to notify me of any 

potential conflicts of interest that he had. To notify 

Dubray Land Services. He did not. 

(Emphasis added.) DuBray's response does not reveal any direct 

adverse effect on his business; rather, it reveals his belief that 

his firing of Hafner for a potential conflict of interest was 

justified. The fact is, however, that neither DuBray's testimony 

nor any other evidence presented demonstrated the direct adverse 

effect on the employer's business which is a prerequisite for a 

finding of misconduct. 

Hafner's potential conflict of interest did not rise to the 

level of an actual conflict of interest. It did not have a direct 

adverse impact on DuBray's business and therefore did not 

constitute misconduct. Without a finding of misconduct, DuBray's 

firing of Hafner was not justified, and the hearings examiner's 

findings to the contrary are clearly erroneous. For these reasons, 

I dissent from the majority opinion. . 

2(/J& 

Justice 

Justice Terry N. Trieweiler concurs in the foregoing dissent. 

15