JEANNA M PEARSON, Employee

PILOT CORP, Employer

An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

The employee worked for two and one-half years, most recently as a shift supervisor for the employer, a gas station/convenience store. Her last day of work was May 14, 2002 (week 20), when she was discharged.

The employee received a copy of the employer's policies upon hire. One such policy was a "fraternization policy" which provided:

PTC must, in the interest of a good working environment and to promote effective supervision, prohibit fraternization among supervisors, including hourly shift managers/supervisors and administrative assistants, and their Team Members. Violation of this policy may result in disciplinary action, including termination.

Examples of fraternizing: "A team member is dating or personally involved with someone who has a higher level of authority" or "supervisors becoming personally or socially involved with Team Members that they supervise."

On March 15, 2002, the employee interviewed an individual named Daniel for a job. Daniel was the father of the employee's oldest child. At the time of the interview, the employee and Daniel were not involved in a relationship. The employee disclosed to the co-manager that Daniel was the father of her oldest child. The co-manager asked the employee if she was living with Daniel and she replied that she was not. The employee hired Daniel as a worker.

About two weeks before her discharge the employee informed the employer's general manager that she was pregnant with Daniel's child. The employee indicated that she understood that the situation could cause some problems. After consulting with the human resources department, the general manager discharged the employee for violating its fraternization policy.

The issue to be decided is whether the employee was discharged for misconduct connected with her work for the employer. In Boynton Cab Co. v. Neubeck & Ind. Comm., 237 Wis. 249, 296 N.W. 636 (1941), the leading case with respect to the meaning of the term "misconduct" as applied to unemployment compensation in the United States, the court said, in part, as follows:

" . . . the intended meaning of the term 'misconduct' . . . is limited to conduct evincing such wilful or wanton disregard of an employer's interests 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 of 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 good-faith errors in judgment or discretion are not to be deemed 'misconduct' with in the meaning of the statute."

Both the employee and the subordinate at issue agreed that at the time the subordinate was hired they were not involved with one another. The employer's fraternization policy focuses on relationships existing during the employment of both individuals and does not reference prior relationships. The employee testified that after the subordinate was hired, she engaged in a personal relationship with the subordinate. The employee knew or should have known that engaging in a relationship with Daniel while both were employed by the employer was in violation of the employer's policy. The type of relationship that developed between the employee and Daniel after his hire would clearly compromise the policy's concerns regarding effective supervision.

The employee acknowledged that she did receive the handbook containing the fraternization policy. Further, the employee brought the fact that she was pregnant with Daniel's child to the employer's attention. The employee was aware that she was not supposed to have relationships with workers that she supervised. That the employer was aware that the employee formerly had some type of relationship with Daniel, did not mean that the employer acquiesced to the employee engaging in a personal relationship with a subordinate when both the supervisor and subordinate were employed by the employer.

The commission therefore finds that in week 20 of 2002 the employee was discharged from her employment and for misconduct connected with her work within the meaning of Wis. Stat. § 108.04(5).

The commission further finds that the employee was paid benefits in the amount of $1,422.00 for weeks 21 through 29 of 2002, for which the employee was not eligible and to which the employee was not entitled, within the meaning of Wis. Stat. § 108.03(1).

The final issue to be decided is whether recovery of overpaid benefits must be waived.

Wisconsin Statute § 108.22(8)(c), provides that the department shall waive the recovery of overpaid benefits if the overpayment was the result of departmental error, and the overpayment did not result from the fault of the employee. Under Wis. Stat. § 108.02(10e)(a) and (b), department error is defined as an error made by the department in computing or paying benefits which results from a mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, or from misinformation provided to a claimant by the department, on which the claimant relied.

The overpayment in this case results from the commission's reversal of the appeal tribunal decision. Such reversal was not due to department error as defined in Wis. Stat. § 108.02(10e)(a) and (b).

The commission further finds that waiver of benefit recovery is not required under Wis. Stat. § 108.22(8)(c), because although the overpayment did not result from the fault of the employee as provided in Wis. Stat. § 108.04(13)(f), the overpayment was not the result of a department error. See Wis. Stat. § 108.22(8)(c)2.

The decision of the administrative law judge is reversed. Accordingly, the employee is ineligible for benefits beginning in week 20 of 2002, and until seven weeks elapse since the end of the week of discharge and the employee has earned wages in covered employment equaling at least 14 times the weekly benefit rate which would have been paid had the discharge not occurred. The employee is required to repay the sum of $1,422.00 to the Unemployment Reserve Fund.

For purposes of computing benefit entitlement: Base period wages from work for the employer prior to the discharge shall be excluded from any computation of maximum benefit amount for this or any later claim. If the employee was also paid base period wages from work by other covered employers, the excluded wages shall be used to determine benefit eligibility. However, any benefits otherwise chargeable to a contribution employer's account shall be charged to the fund's balancing account.

Dated and mailed October 31, 2002
pearsje . urr : 132 : 1 : MC 692.02

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

Laurie R. McCallum, Commissioner

The commission did discuss witness credibility and demeanor with the ALJ who presided at the hearing. As reflected in his decision, the ALJ reasoned that because the employee told the co-manager at the time of hire that she had had a child with the subordinate, the employer could not rely on the fraternization policy to claim misconduct. The commission disagrees with the ALJ's rationale and conclusions for reasons set forth above.

cc: Pilot Corp. (Franksville, Wisconsin)

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uploaded 2002/11/08