Source: http://mn.gov/law-library-stat/archive/ctapun/0711/opa062091-1127.htm
Timestamp: 2018-01-19 05:21:03
Document Index: 748940728

Matched Legal Cases: ['§ 268', '§ 268', '§ 268', '§ 268', '§ 34', '§ 268']

Cheryl M. Koehnen, Relator, vs. Titan Construction, Inc., Respondent, Department of Employment and Economic Development, Respondent. A06-2091, Court of Appeals Unpublished Decision, November 27, 2007.
A06-2091
Cheryl M. Koehnen,
Titan Construction, Inc.,
File No. 861606
Cheryl M. Koehnen, 3829 67th Street East, Inver Grove Heights, MN 55076-2233 (pro se relator)
Timothy D. Lees, Hennek Klaenhammer & Lees, P.A., 2585 Hamline Avenue North, Suite A, Roseville, MN 55113 (for respondent Titan Construction, Inc.)
Lee B. Nelson, Department of Employment and Economic Development, First National Bank Building, 332 Minnesota Street, Suite E200, St. Paul, MN 55101-1351 (for respondent Department of Employment and Economic Development.)
Relator Cheryl M. Koehnen challenges her disqualification from receiving unemployment benefits due to employment misconduct. Relator argues that (a) her actions did not constitute employment misconduct and (b) the unemployment law judge’s (ULJ) refusal of her request for an in-person hearing impacted her due process rights. We affirm.
Relator Cheryl M. Koehnen was employed by respondent Titan Construction, Inc., (Titan) from October 4, 2004, to April 3, 2006. Relator was initially hired as an office manager, but was later promoted to chief financial officer/general manager. Relator’s duties at the time of her discharge included managing the company’s records and filings relating to finance, accounting, and human resources, and performing general clerical duties. Relator was discharged for allegedly failing to complete her job duties, misappropriating company funds, and failing to file tax and payroll documents.[1]
Relator subsequently applied for unemployment benefits from respondent Department of Employment and Economic Development (DEED). She was disqualified from receiving benefits based on a finding that she had engaged in employment misconduct. Relator appealed the decision and requested an in-person hearing. The request was denied, and the proceedings were instead conducted via telephone.
At the hearing, Ron DeTomaso, the president of Titan and relator’s direct supervisor, and Tony DeTomaso, an outside accountant, testified on behalf of Titan. Ron testified that he was initially satisfied with relator’s work and gave her a favorable review in January 2006. But he claimed that he was not closely monitoring relator’s performance during that time period, basing relator’s evaluation on self-reported information.
Shortly thereafter, Ron noticed some discrepancies in Titan’s financial records and asked relator to resolve them. Relator was unable to correct the problems so Ron asked his brother Tony, to review the records. As Tony began reviewing the records, he noticed what he claimed were “alarming deficiencies within the financial system.” According to Tony, liabilities and assets on the company’s 2005 balance sheet were not reported correctly and could not be reconciled with 2004 documentation.
Tony began to delve further into Titan’s records and discovered that numerous tax filings and payments had not been properly performed. Tony testified that payroll tax deposits for several months had been filed late, and deposits for January, February, and March 2006 had not been made at all. Federal unemployment taxes were also paid late, and state wage reports and payroll tax forms were not submitted. Similarly, Tony asserted that state withholding had not been timely performed and subcontractors were not provided with 1099 forms. Due to the late payments and filings, Titan incurred over $8,700 in penalties, fees, and interest. Ron testified that relator had not informed him about the delinquent tax filings and payments.
Tony and Ron also claimed that relator was negligent in her administration of employee benefits and services. After reviewing Titan’s records, Tony realized that employees who were no longer employed by Titan had not been removed from the company’s health insurance plan, causing Titan to incur approximately $6,000 in unnecessary premium payments. Documents related to the company’s 401k plan had also not been filed on time. Ron stated that relator ignored several renewal notices for employee certifications from the National Association of the Remodeling Industry, which resulted in the certifications being cancelled.
Finally, Ron alleged that relator did not properly manage Titan’s debts. According to Ron, relator failed to make Titan’s mortgage, automobile, and utility payments. And, despite receiving several calls and invoices regarding delinquent accounts, relator neglected to pay several vendors. Ron acknowledged that Titan’s failure to satisfy its debts was due, in part, to the company’s financial problems. However, he claimed that relator was derelict in her duties in that she failed to keep him apprised of financial issues as they arose. In addition, Ron testified that relator did not request his input in deciding how to mitigate the damage to Titan’s relationships with vendors that resulted from the lack of funds. Instead, he claimed that when he asked about the company’s finances, relator would tell him Titan was “keeping afloat,” “making the grade,” or “pulling through.”
Relator disputed the allegation that her performance was deficient. Relator testified that she was awarded with occasional lunches, a golf outing, and an expense-paid trip to Las Vegas for her and her husband in late 2005 for exceptional job performance. Relator further testified that she received a favorable review and an 8% raise only two months prior to her termination. The performance appraisal stated that relator’s “[d]edication to company’s success is outstanding. Many late hours worked. Teamwork is outstanding. Ability to solve a personnel issue is very good. Ability to solve an office procedural issue is outstanding.”
Relator claimed that the performance issues alleged by Titan were attributable to the company’s financial problems and a lack of competent support staff. She testified that bills were not timely paid because Titan did not have sufficient funds to make all payments as they came due. Rather, relator would have to decide which bills to pay with the funds that were available. Relator claimed that she discussed the financial problems with Ron “on multiple occasions . . . .” In addition, relator alleged that her administrative assistant had attendance and performance issues that caused relator to be unable to timely-complete her work.
The ULJ found that relator was disqualified from receiving benefits because she had engaged in employment misconduct by failing to process necessary paperwork and by neglecting to communicate the status of her tax and payroll filing responsibilities to Titan. Relator moved for reconsideration, but the ULJ affirmed the decision. This certiorari appeal followed.
When an employer discharges an employee for employment misconduct the employee is disqualified from receiving unemployment benefits. Minn. Stat. § 268.095, subd. 4(1) (2004). Employment misconduct is intentional, negligent, or indifferent conduct that displays either “a serious violation of the standards of behavior the employer has the right to reasonably expect” or “a substantial lack of concern for the employment.” Id., subd. 6(a) (2004).
Whether an employee engaged in employment misconduct presents a mixed question of fact and law. Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002). Whether the employee’s actions constitute employment misconduct is a question of law reviewed de novo. Lolling v. Midwest Patrol, 545 N.W.2d 372, 377 (Minn. 1996). Conversely, whether the employee committed a particular act is a factual question. Scheunemann v. Radisson S. Hotel, 562 N.W.2d 32, 34 (Minn. App. 1997).
This court reviews factual findings in the light most favorable to the decision. Skarhus v. Davanni’s Inc.,721 N.W.2d 340, 344 (Minn. App. 2006). The ULJ’s determination may be reversed or modified on appeal only if the decision derives from unlawful procedure, relies on an error of law, is unsupported by substantial evidence, or is arbitrary and capricious. Minn. Stat. § 268.105, subd. 7(d)(3)-(6) (Supp. 2005). “Credibility determinations are the exclusive province of the ULJ and will not be disturbed on appeal.” Skarhus,721 N.W.2d at 345.
Relator contends that her actions do not constitute employment misconduct because the evidence in the record demonstrates that she did not intentionally fail to complete her duties. Relator claims that her failure to perform necessary tasks was inadvertent and attributable to her being “overworked,” “understaffed,” and managing the finances of an insolvent employer. However, employment misconduct need not be intentional; an employee’s negligence or indifference can also rise to a level of impropriety justifying denial of benefits. See Minn. Stat. § 268.095, subd. 6(a).
Although relator claims that her actions do not constitute employment misconduct, the finding of employment misconduct, under the statute, is reasonable. In denying unemployment benefits, the ULJ agreed that some of relator’s performance problems resulted from the magnitude of her workload and Titan’s cash flow problems, but found that “her failure to properly communicate the tax filing status, payroll tax payment status, [and] vendor payment status and her failure to keep up with necessary paperwork and filings” constituted employment misconduct. Put another way, the ULJ recognized that relator was not to blame for all of the financial and accounting problems, but found that Titan, as her employer, had the right to reasonably expect relator to be forthright about these issues as they arose.
Failure to maintain open and honest communication with an employer [regarding performance of job responsibilities] can constitute employment misconduct. See Baron v. Lens Crafters, Inc., 514 N.W.2d 305, 307-08 (Minn. App. 1994) (holding that failure to perform job duties constitutes misconduct). Relator may have been overworked and understaffed, but Titan, who relied almost exclusively upon relator to manage its finances, could expect that relator would openly communicate with management about reporting and financial problems. Relator’s performance constitutes a breach of her responsibilities to Titan. It resulted in deficiencies in tax filings and paperwork, unnecessary pecuniary penalties and costs, and damage to business relationships with vendors.
Relator concedes that she did not properly monitor Titan’s finances or timely file all required tax and payroll documentation. She contends that the ULJ’s finding that she failed to communicate with Titan about these matters is erroneous because she allegedly discussed them with Ron. The evidence in the record supports the ULJ’s finding. Ron testified that relator did not provide accurate information about the status of Titan’s tax and payroll filings, record keeping, and financial problems. Both he and Tony claimed they first realized the true extent of the financial and accounting issues only after Tony began to review the company’s records.
Ron testified that he knew Titan was having difficulty paying vendors, but claimed to have no knowledge of other problems, including delinquent tax and payroll filings. Ron expressed frustration with the lack of communication about how to best resolve the outstanding balances owed to vendors. Whether relator and Ron communicated about these matters is an issue of credibility. This court defers to the ULJ’s credibility determinations on appeal. Skarhus, 721 N.W.2d at 345. With evidence in the record that Ron was unaware of these problems, the ULJ’s finding is not erroneous.
Relator argues that she was denied due process because she did not receive an “in-person” hearing. Specifically, relator claims that her due process rights were violated because the telephone hearing was an “unnerving” four-hour process that involved 57 exhibits and “several lapses and unexplained silences in the transcript.”
State law does not require an in-person hearing (the wisdom of that is not before us). The legislature vested DEED with the discretion to determine “the method by which the evidentiary hearing is conducted.” Minn. Stat. § 268.105, subd. 1(b) (Supp. 2005). DEED has the authority to adopt relaxed rules for evidentiary hearings involving unemployment benefits. Id. (“The rules need not conform to common law or statutory rules of evidence and other technical rules of procedure.”). A ULJ need only “exercise control over the hearing in a manner that protects the parties’ rights to a fair hearing.” Minn. R. 3310.2921 (2004)
Whether the protections afforded by state law satisfy due process is an issue of law reviewed de novo. Zellman ex rel. M.Z. v. Indep. Sch. Dist. No. 2758, 594 N.W.2d 216, 220 (Minn.App.1999), review denied (Minn. July 28, 1999). “Unemployment benefits are an entitlement protected by the procedural due process requirements of the fourteenth amendment.” Schulte v. Transp. Unlimited, Inc., 354 N.W.2d 830, 832 (Minn. 1984). Due process requires a fair procedure. See Mathews v. Eldridge, 424 U.S. 319, 334, 96 S.Ct. 893, 902 (1976); Goldberg v. Kelly, 397 U.S. 254, 266-71, 90 S.Ct. 1011, 1019-22 (1970). In the unemployment context, due process requires an “opportunity to be present during the taking of testimony or evidence, to know the nature and contents of all evidence adduced in the matter, and to present any relevant contentions and evidence the party may have.” Juster Bros., Inc. v. Christgau, 214 Minn. 108, 119, 7 N.W.2d 501, 507 (1943) (quotation omitted).
The telephone hearing conducted by a ULJ does meet the bar[2] for basic due process and satisfies these requirements. Although relator may not have been physically present before the witnesses, she was “present” in the sense that she was able to hear each witness’s live testimony, just as she would in an in-person hearing. Relator had the opportunity to testify, present her own evidence, cross-examine Titan’s witness, and received copies of Titan’s exhibits prior to the hearing.
Other jurisdictions have ruled that evidentiary hearings for unemployment benefits conducted by telephone are not constitutionally infirm. See, e.g., Wright v. Unemployment Comp. Bd. of Review, 554 N.E.2d 137, 138-39 (Ohio. Ct. App. 1988); Babcock v. Employment Div., 696 P.2d 19, 20-22 (Or. Ct. App. 1985); Greenberg v. Simms Merch. Police Serv., 410 So. 2d 566, 567-68 (Fla. Dist. Ct. App. 1982); Slattery v. Unemployment Ins. Appeals Bd., 131 Cal. Rptr. 422, 424-26 (Cal. Ct. App. 1976); see generally Russell G. Donaldson, Propriety of Telephone Testimony or Hearings in Unemployment Compensation Proceedings, 90 A.L.R. 4th 532 (1991). Thus, relator received due process.
Relator asserts that this court should not defer to a ULJ’s credibility determinations resulting from a telephone hearing because the ULJ cannot assess the witness’s demeanor. We understand relator’s argument. However appellate courts defer to credibility determinations of a reviewing adjudicator. See Tuff v. Knitcraft Corp., 526 N.W.2d 50, 51 (Minn. 1995); Jenson v. Dep’t. of Econ. Sec., 617 N.W.2d 627, 631 (Minn. App. 2000), review denied (Minn. Dec. 20, 2000). Relator agrees that it was proper to accord deference in the past because all unemployment benefits hearings were held in-person. She alleges the recent changes to the law require that this court no longer defer to DEED adjudicators. According to relator, the legislature first permitted DEED to conduct evidentiary hearings via telephone in 2005. This is an inaccurate statement of law. The 2005 amendments did not modify the hearing procedure for appeals from in-person to telephone only. DEED retained the same discretion to decide “the method by which the evidentiary hearing is conducted” that it had prior to the amendments. See 2005 Minn. Laws ch. 112, article 2, § 34 at 704 (retaining language that allows DEED to decide the type of hearing).
Until statutory amendments in 2005 changed DEED’s review procedure, we deferred to the credibility determinations of adjudicators, uninvolved in the evidentiary hearing, whose decisions were reached by reviewing the hearing’s record. See Tuff, 526 N.W.2d at 51; Ywswf v. Teleplan Wireless Serv. Inc., 726 N.W.2d 525, 530-31 (Minn. App. 2007). Under current law, the same ULJ that presided over the evidentiary hearing reviews a party’s motion for reconsideration. Ywswf, 726 N.W.2d at 530. Relator’s argument is unpersuasive.
Relator’s argument that in-person observation of witness testimony would enhance the fact-finder’s credibility assessment is logical. However, her contention overlooks the enabling statute and additional factors that enter into a determination of credibility that can be weighed without observation of in-person testimony. As DEED notes, many variables play a part in assessing the veracity of a witness, including the witness’s (1) stake in the outcome, (2) relationship to the parties, (3) way of learning and recalling the facts, (4) manner, (5) age and experience, (6) apparent honesty, (7) frankness and directness, (8) the relationship between the witness’s testimony and other evidence, (9) and any other factors the fact-finder may want to consider. Id. at 532-33 (citing 4 Minnesota Practice, CIVJIG 12.15 (2006)). The language of the statutes governing evidentiary hearing procedures reflect a legislative intent to afford a hearing without many of the formalities involved in a formal court trial. See Minn. Stat. § 268.105, subd. 1(b); Minn. R. 3310.2921. We defer to the ULJ’s credibility determinations here.
[1] The allegations pertaining to misappropriation of company funds were not a basis for denial of unemployment benefits.
[2] Having said that, face-to-face hearings, are better than “phone trials.”