Court Of Appeal Holds Insubordination Is “Misconduct” And Is Grounds For Denial Of Unemployment Insurance Benefits

Many employers require employees to acknowledge in writing the employee’s receipt of a notice or memorandum of discipline when workplace discipline is imposed. In Paratransit, Inc. v. Unemployment Insurance Appeals Board, the California Court of Appeal held: (1) it is lawful for an employer to require an employee to sign such an acknowledgement, (2) an employee’s refusal to sign such an acknowledgement form when lawfully presented to the employee is “misconduct” as that term is defined in Unemployment Insurance Code section 1256, and (3) such “misconduct” is grounds for denying unemployment insurance benefits to an employee who is terminated for refusing to sign a discipline acknowledgement form lawfully presented to him or to her.

Following its investigation of a customer complaint, Paratransit conducted a post-investigation meeting with its employee, Craig Medeiros, to inform Medeiros that Paratransit investigated the complaint, that Paratransit concluded the customer’s complaint was valid, and that Medeiros would receive two days off without pay as discipline. Paratransit informed Medeiros that signing the form was merely an acknowledgement of his receipt of the notice of discipline and not an admission of wrongdoing. Medeiros requested that a representative of his union be present, stated his union instructed him not to sign anything without a union representative present, and refused to sign the form despite being informed by Paratransit that his employment would be terminated. Medeiros refused to sign the form, and Paratransit terminated his employment. A four-year saga followed.

After he was terminated, Medeiros submitted a claim for unemployment insurance benefits, which the California Employment Development Department (EDD) denied. Medeiros appealed that decision, and the Administrative Law Judge (“ALJ”) who heard the appeal upheld the EDD’s denial of the claim following an evidentiary hearing. Medeiros then appealed to the California Unemployment Insurance Appeals Board, which reversed the decision of the ALJ, finding Medeiros’ refusal to sign the form “was, at most, a simple mistake or an instance of poor judgment” on the part of Medeiros. Paratransit then filed in the Sacramento County Superior Court a Petition for Writ of Mandamus requiring the Unemployment Insurance Appeals Board to vacate its decision in favor of Medeiros and enter instead a decision against Medeiros. The trial court granted that Petition, and Medeiros then appealed to the California Court of Appeal.

On appeal, the Court of Appeal affirmed the trial court’s decision in favor of Paratransit and against the Unemployment Insurance Appeals Board. In so holding, the Court of Appeal looked to Labor Codes section 2856 which states that “an employee shall substantially comply with all the directions of his employer concerning the service on which he is engaged, except where such obedience is impossible or unlawful or would impose new and unreasonable burdens upon the employee.” The court distinguished what is and what is not “misconduct” for purposes of determining whether a terminated employee is eligible for unemployment insurance benefits:

Misconduct within the meaning of section 1256 is “limited to conduct 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 and substantial disregard of the employer’s interests or the employee’s duties and obligations to his employer. On the other hand mere inefficiency, unsatisfactory conduct, failure in good performance as the result of inability or incapacity, inadvertencies or ordinary negligence in isolated instances, or in good faith errors in judgment or discretion are not to be deemed “misconduct” within the meaning of the statute.”

The court concluded, based on the record facts, that Medeiros’ “failure to sign the disciplinary memo violated his obligations to Employer under Labor Code section 2856,” and was “misconduct” that disqualified Medeiros for unemployment insurance benefits. The court determined that even though the document he was asked to sign did not specifically indicate that he was not admitting fault, it was clearly a “receipt” of a notice regarding an investigation that had already been completed. His refusal to sign the document, when instructed to do so by his employer, was without any legitimate basis, and his actions were therefore determined to be “misconduct,” pursuant to Unemployment Insurance Code section 1256, precluding his right to unemployment insurance benefits.

The court further concluded, for purposes of determining whether Medeiros’ engaged in “misconduct” by refusing to sign the disciplinary memorandum, that the meeting Paratransit held with Medeiros to inform him of the results of Paratransit’s investigation of the customer complaint and to inform him of the discipline Paratransit decided to impose did not trigger Medeiros’ rights as an employee subject to a collective bargaining agreement to have a union representative present during the meeting because the meeting was not an investigatory meeting that could result in discipline. Rather, Medeiros “never asked for union representation during [the] investigation. The only thing [Medeiros] was confronted with at the . . . meeting was his employer’s decision to discipline him at which time he did not have a right to union representation.” In this regard, we note that the National Labor Relations Board has exclusive jurisdiction over claims of alleged unfair labor practices, and the court’s decision in this case is not a precedential decision as to whether Medeiros did nor did not have a right to union representation during the meeting under the National Labor Relations Act

The court concluded, also, that Medeiros was not entitled to rely on purported union advice the court found erroneous: “The trial court also concluded that, even if the union president had told [Medeiros] not to sign anything without union representation, [Medeiros] was not entitled to rely on such erroneous advice. We agree. Were it otherwise, a union could insulate members from adverse employment action simply by giving them bad advice that they need not comply with an employer’s orders. If the union gave [Medeiros] bad advice that resulted in his termination, [Medeiros’] recourse may be against his union, not a claim for unemployment insurance funds.”

It is important to note that the question of whether an employee has engaged in “misconduct” that disqualifies him or her for unemployment insurance benefits often will be a fact-specific inquiry. Unfortunately, there is no bright line rule. Examples of “misconduct” giving rise to disqualification, as that term has been interpreted, have included repeated tardiness despite admonitions from an employer, a refusal to submit to a drug test in a safety-sensitive position, and, more generally, dishonest acts committed willfully and which have injured the employer. As reiterated in Paratransit, mere inefficiency, unsatisfactory conduct, failure in good performance, inadvertencies 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. The EDD provides some guidance on the issue of what might rise to the level of “misconduct” here.

Nevertheless, we think this decision is a good decision for employers that brings some welcome clarity regarding the rights of employers to expect and, if necessary, to demand compliance with lawful directives to employees.

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