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

STEVEN E FREDRIKSSON, Employee

VENTURA & COMPANY, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 04605176RC


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:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employee worked for the employer, a retail jewelry store, for approximately seven years as the general manager. His last day of work was April 7, 2004 (week 15), and he was discharged on April 26, 2004 (week 18).

The issue to be decided is whether the employee's discharge was for misconduct connected with the employee's employment.

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."

The employee was the general manager and ran the store. One of the owners worked in the store a few days each week.

The employee and one other worker were allowed to purchase items at cost. A customer purchased a Yacht Master Rolex watch for about $14,000. After some time, the customer returned to the store and the employee allowed him to trade in the watch and on paperwork indicated that the customer received $10,000 for the trade in. The customer used the credit and paid an additional amount toward six other watches that cost the employer $18,315. The retail value with a discount on those watches was $26,600. The employer would have made a profit of $8,000.00, but the employee had given the customer a $10,000 credit and the employer was $2,000.00 short. However, the employer normally would have been able to sell the watch and its profit would have been whatever the watch sold for, after subtracting the $2,000.

The day after the customer brought in the watch the employee sent the watch to Rolex to get it refurbished at a cost of $451.50. As such, the employer had to sell the watch for more than about $2,500 to break even. When the employee wrote the paperwork to have the watch refurbished, he indicated that he was the owner of the watch. The employee did not write up a sales slip or discuss this matter with the employer until much later. The same day, the employee also sent for refurbishment a two-tone Rolex he purchased from the employer five or six years earlier for about $2,000.

The employer suffered a break in on March 16, 2004. After the break in, one of the owners noticed the Yacht Master Rolex watch on the employee's wrist. The employer checked to see how the watch came to the store and learned about the trade.

The employee indicated he had traded two watches for the Yacht Master. One of the watches was the two-tone Rolex. He also indicated that he was going to trade a Cartier watch that he valued at $2,000 that the employer had given him as a present.

On May 3, 2004, the employee and employer's president signed an agreement indicating that the employee took, without knowledge of the owners, on February 7, 2004, a Rolex Yacht Master watch with a value of $19,750, as appraised by the employee himself in writing, and the only consideration paid was the "trade-in" of two used watches. The document indicates that the two-tone Rolex had an agreed value of approximately $4,875. Under the terms of the agreement the employer was to retain the Rolex Yacht Master and the Cartier watches. The employee was to keep the two-tone Rolex after paying the employer $451.50, which was the cost of refurbishing that watch.

After the employer discovered the situation with the Yacht Master watch, the employer questioned the employee as to whether there had been any similar transactions in the past. The employee indicated that two years earlier he traded his wife's Rolex for a President Rolex. The employee did not fill out any documentation to record this transaction or ask the employer for permission. He assigned a value to the watch of $11,000 according to the post-employment agreement. The employee traded in his wife's old watch for the President and that watch was eventually sold by the employer for $3,150. The employee's wife had agreed, pursuant to the post-employment agreement, to return that watch. The employee had the President watch refurbished at the store's expense but did not reimburse the employer for this refurbishment.

After the break in the employer investigated its records and found numerous questionable trade-in transactions totaling about $50,000 and brought one specific example to the hearing. In the transaction at the hearing, the customer was sold a diamond cross necklace with a price of $337.50 but paid no money because he had a trade in worth $337.50. The item or items traded in was not specified. In all of the questionable transactions this was the case. The employer questioned how the customer's trade in always exactly matched the amount of money that the item the customer was given cost. This caused the employer to conclude that the customers did not trade in any merchandise and were simply given the items from the store. The employee agreed he made many transactions such as this. He would usually write only "trade" but not specify what was traded. The employee stated that he used the trade ins for the scrap value of the jewelry. The employer could melt down gold and reuse clasps and small diamonds for repairs. The employee argued that "by taking something in trade, I couldn't then manipulate it or change it." This may mean that since the trade-in was destined to be taken apart and used for repair, the employee could not list it on the receipt because it would not later appear in inventory. However, the employee could easily have avoided this problem by indicating specifically what was traded in and that the item was to be taken apart for scrap value. The approach the employee claimed to be using deprived the employer of any knowledge of what was allegedly coming into the store. The employee testified that the customer in the example was "a very, very dear friend of mine."

The commission concludes that the employee traded watches that he knew were inferior in value for two Rolex watches. The commission further concludes that the employee gave away merchandise to certain persons. While the employer may not have specifically warned the employee about such behavior, the employee should have been aware that depriving the employer of merchandise without notifying the employer or obtaining permission could cause serious harm to the employer. The employer should have been more vigilant in monitoring the employee's actions. However, this does not excuse the employee's behavior, in particular in a situation such as this where the employee ran the business and the employer placed a great deal of trust in him to do so.

The employee's actions demonstrated such a willful and substantial disregard of the employer's interests as to amount to misconduct connected with the employee's work.

The commission therefore finds that in week 18 of 2004, the employee was discharged and that the discharge was for misconduct connected with the employee's work, within the meaning of Wis. Stat. § 108.04(5).

The commission further finds that the employee was paid benefits for weeks 19 through 38 of 2004, amounting to a total of $6,580.00; for which he was not eligible and to which he was not entitled, with in the meaning of Wis. Stat. § 108.03 (1), and pursuant to Wis. Stat. § 108.22 (8)(a), he is required to repay such sum to the Unemployment Reserve Fund.

The commission further finds that waiver of benefit recovery is not required under Wis. Stat. § 108.22 (8)(c), be cause although the over payment 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.

DECISION

The decision of the administrative law judge is reversed. Accordingly, the employee is ineligible for benefits beginning in week 18 of 2004 and until seven weeks have elapsed since the end of the week of discharge and the employee has earned wages in covered employment performed after the week of discharge equaling at least 14 times the weekly benefit rate the employee would have been paid had the discharge not occurred. The employee is required to repay the sum of $6,580.00 to the Unemployment Reserve Fund. The initial Benefit Computation (Form UCB-700), issued on May 30, 2004, is set aside. If benefit payments become payable based on other employment, a new computation will be issued as to those benefit rights.

Dated and mailed June 29, 2005
fredrst . urr : 145 : 1 MC 630.01

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner


MEMORANDUM OPINION

The commission discussed witness credibility and demeanor with the ALJ who held the hearing. The ALJ found it hard to resolve the issue of credibility in this case. She was convinced that the employee had committed misconduct after listening to the employer's testimony. After listening to the employee's testimony the ALJ finally concluded that the employee did not intend to do anything inappropriate and in fact at the time did not realize he had done anything wrong. The ALJ noted that the employee did not hide the Yacht Master and specifically informed one of the owners that he had traded for it. Further, the ALJ pointed out that the employer would not have known about his wife's watch had he not informed the employer of the trade. The ALJ pointed out that the employee was working in a relaxed environment and that the employer and employee were friends. The commission agrees that it was difficult to resolve the issue of credibility. The commission, like the ALJ, was troubled by the fact that the employee openly wore the watch. Given the owners would be likely to notice that he had a new watch and to have a pretty good idea of the value of the watch, the fact that he openly wore the watch suggests that the employee did not realize his actions were wrong. However, the commission did not find the employee to be credible. The employee ran the store and was aware that the employer was not closely monitoring his actions. The very circumstances themselves indicate that the employee was behaving inappropriately and the employee had no reasonable explanation for his actions.

 

NOTE: Repayment instructions will be mailed after this decision becomes final. The department will with hold benefits due for future weeks of unemployment in order to off set over payment of U.I. and other special benefit programs that are due to this state, an other state or to the federal government.

Contact the Unemployment Insurance Division, Collections Unit, P. O. Box 7888, Madison, WI 53707, to establish an agreement to repay the over payment.

 

cc:
Attorney Phillip R. Godin
Attorney Thomas Van Beckum Law Office SC


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