STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

TIMOTHY L MARTIN, Employee

R  L  McCARTHY PUMP & SUPPLY INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 03001030WK


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

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:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employee worked for about 15 years as the owner-manager of the employer, a wholesale plumbing and pump distribution company. His last day of work was December 27, 2002 (week 52).

The employee owned 50 percent of the stock of the employer corporation. The other 50 percent was owned by his brother. The corporation lost more than $100,000 in 2001 and more than $50,000 in 2002. The employee and his brother agreed to cease the operations of the business on December 27, 2002. The employer corporation still owns the building in which the business operated and the land on which the business was located.

The issue to be determined is whether the employee's separation from employment was for any reason permitting immediate benefit payment.

The Wisconsin Supreme Court has held that where an individual acting in the capacity of owner makes the decision to cease business operation due to adverse economic circumstances, the resulting unemployment was due to the employee owner's voluntary conduct. Fish v. White Equipment Sales and Service, Inc., 64 Wis. 2d 737 (1974); Hanmer v. Department of Industry, Labor and Human Relations, 92 Wis. 2d 90 (1979). In both Fish and Hanmer, the Wisconsin Supreme Court rejected the contention that such quitting was with good cause attributable to the employer. The Court stated in Hanmer:

In Kessler v. Industrial Comm., 27 Wis. 2d 398, 134 N.W. 2d 412, this court stated that the phrase "good cause attributable to the employer" means that:

'. . . The resignation must be occasioned by 'some act or omission by the employer' constituting a cause which justifies the quitting. Good cause for quitting attributable to the employer as distinguished from discharge must involve some fault on his part and must be real and substantial. '

In the case before us there is no contention that the decision to terminate the business was due to some fault on the part of the corporation. From the record here it appears Prestige Furniture Incorporated's misfortune resulted entirely from factors beyond its control. Moreover, in view of the fact that the appellants were in sole control of the business, any fault attributable to the employing unit would likewise have been attributable to them. For us to find a termination for cause under these circumstances would be to hold that an employee could create the very cause for which he is justified in quitting. We decline to do so.

The commission has, with few exceptions, (1)   followed the principle that the decision to cease business operations is a voluntary quit under Wis. Stat. § 108.04(7)(a), (2)   and not with good cause attributable to the employer. (3)    The commission's decisions have been affirmed by a number of circuit courts. (4)

Wisconsin Statute § 108.04(7)(r) provides that the benefit ineligibility disqualification for voluntary termination of work under § 108.04(7)(a) does not apply "if the department determines that the employee owns or controls, directly or indirectly, an ownership interest, however designated or evidenced, in a family corporation and the employee's employment was terminated by the employer because of an involuntary cessation of the business of the corporation under one or more of the conditions specified in sub. (1)(gm).

Wisconsin Statute § 108.04(1)(gm), sets forth the four statutory circumstances in which an involuntary cessation of the business must occur in order to avoid application of the benefit ineligibility disqualification under § 108.04(7)(a). Those circumstances are set forth as follows:

1. Dissolution of the corporation, due to economic inviability, under ch. 180 or the analogous applicable laws of the jurisdiction in which the corporation is incorporated;

2. Filing for corporate bankruptcy;

3. Filing for personal bankruptcy by all owners who are personally liable for any of the debts of the corporation; or

4. Disposition of a total of 75% or more of the assets of the corporation using one or more of the following methods:

a. Assignment for the benefit of creditors.

b. Surrender to one or more secured creditors or lienholders.

c. Sale, due to economic inviability, if the sale does not result in ownership or control by substantially the same interests that owned or controlled the family corporation. It is presumed unless shown to the contrary that a sale, in whole or in part, to a spouse, parent or child of an individual who owned or controlled the family corporation, or to any combination of 2 or more of them, is a sale to substantially the same interests that owned or controlled the family corporation.

In this case, the employer corporation has not been dissolved. Neither the employer corporation nor the employee owner has filed for bankruptcy. The employer corporation did not dispose of 75% or more of the assets of the corporation. The evidence did not establish that the employee's separation from employment met any circumstance set forth in Wis. Stat. § 108.04(1)(gm).

The commission therefore finds that as of week 52 of 2002, the employee terminated his work with the employing unit, within the meaning of Wis. Stat. § 108.04(7)(a), and not for any reason constituting an exception to that section.

The commission further finds that the employee was paid benefits in the amount of $1,974.00 for weeks 2 through 7 of 2003, 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 ALJ found that the employee quit his employment with good cause attributable to the employer. The ALJ's decision is contrary to case law and commission decisions issued in the last 30 years. The overpayment of benefits resulted from the ALJ's misapplication and misinterpretation of the law.

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

DECISION

The decision of the administrative law judge is reversed. Accordingly, the employee is ineligible for benefits beginning in week 52 of 2002, and until four weeks have elapsed since the end of the week of quitting and the employee has earned wages in covered employment performed after the week of quitting equaling at least four times the employee's weekly benefit rate which would have been paid had the quitting not occurred. Recovery of overpaid benefits in the amount of $1,974 is waived. (5)

Dated and mailed September 17, 2003
martiti . urr : 132 : 1 : BR 335.01  VL 1054.09

/s/ David B. Falstad, Chairman

/s/ James T. Flynn, Commissioner

/s/ Robert Glaser, Commissioner


NOTE: The commission did not consult with the ALJ regarding witness credibility or demeanor. The commission has reversed the ALJ's decision as a matter of law.

cc: Gregory A. Frigo


[ Search UC Decisions ] - [ UC Digest - Main Index ] - [ UC Legal Resources ] - [ LIRC Home Page ]


Footnotes:

(1)( Back ) In Hamachek v. Sturgeon Bay IGA Food Center, UI Dec. Hearing No. 90-400272SB (LIRC Aug. 14, 1990), the commission found that where the corporation's creditor took control of the business premises and locked out the employee-owner, there was no voluntary quit.

(2)( Back ) Armon v. Top Care Inc., UI Dec. Hearing No. 03600226MW (LIRC Aug. 27, 2003); Holt v. Art Unlimited LLC, UI Dec. Hearing No. 01400740AP ((LIRC June 20, 2001); Kleczka v. La Chalet Tavern & Restaurant, UI Dec. Hearing No. 00606649WK (LIRC Oct. 13, 2000); Cornelius v. Siesel Construction Co., UI Dec. Hearing No. 92606454 (LIRC Feb. 26, 1993); McMullen v. Vend-1 Inc., UI Dec. Hearing No. 91608191RC (LIRC Jul. 17, 1992); Seritch v. American Maintenance & Home Improvement Company, Inc., UI Dec. Hearing No. 91-606503 (LIRC Nov. 15, 1991); Falbo v. Alex's Bar & Restaurant, F A D A Corp., UI Dec. Hearing No. 89-608793 (LIRC May 11, 1990); Ogle v. Sharemark Companies, Inc., UI Dec. Hearing No. 90-402729AP (LIRC Nov. 29, 1990); and Kilmer v. BJ Country Club, Inc., UI Dec. Hearing No. 90-000244JV (LIRC Apr. 5, 1990).

(3)( Back ) Jung v. Jung's Inc., UI Dec. Hearing No. 92401707SH (LIRC Aug. 26, 1992); Roach v. Roy's Inc., UI Dec. Hearing No. 91-200312 (LIRC May 1, 1991); and Chesen v. Pell Lake Lumber Company, Inc.., UI Dec. Hearing No. 90-005234JV (LIRC Mar. 27, 1991).

(4)( Back ) Graham v. DILHR, No. 94-CV-0635 (Wis. Cir. Ct. Rock County Apr. 11, 1985); Smith v. LIRC, No. 579-848 (Wis. Cir. Ct. Milwaukee County Dec. 21, 1982); Norberg v. LIRC & Brothers Two and Associates, Inc., No. 81-CV-26 (Wis. Cir. Ct. Taylor County Oct. 20, 1982); and Fink & Fink v. ILHR, Nos. 151-058 &151-059 (Wis. Cir. Ct. Dane County June 20, 1977).

(5)( Back ) The employee was also overpaid benefits due to a computational error by the department, and an initial determination dated March 3, 2003, waived recovery of the overpayment for those weeks. 

 


uploaded 2003/09/23