BRADLEY J BAIN, Employee

CAPITAL CONTRACTORS INC (NY), 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 approximately three years as a sales representative and later as an operations manager for the employer, a janitorial service provider. He was discharged on January 13, 2005 (week 3).

Prior to the spring of 2004, the employee worked in the Green Bay office with a manager, Kathy Glassl. Ms. Glassl then moved to the employer's Milwaukee office, but retained management responsibility for the Green Bay office, which was then staffed by the employee alone. The employee earned approximately $47,000 annually. He was responsible for the sale of janitorial service contracts and for client service during the term of the contract.

The employer is in the business of furnishing janitorial services and supplies for office buildings, retail stores, medical centers, sport facilities and other commercial enterprises. It typically subcontracts the actual cleaning work. Two of the Wisconsin subcontractors whose services the employer utilized were Program Cleaning, Inc. and Modern Maintenance. Both of these subcontractors were owned by Ms. Grassl's boyfriend. The employer also sells cleaning-related paper products to clients. Orders for paper products are typically filled by another of the employer's subcontractors, Belson. The employee testified that the employer would then bill its customer for the Belson products, adding a charge of approximately 15 percent. In one case, the employer's customer asked that Belson bill them directly. Belson complied, but adjusted the product price and paid a 15 percent commission to the employer on these sales.

Sometime prior to the employee's discharge, a worker in the employer's Milwaukee office told the chief operating officer that some documents had been faxed from the Green Bay office to the Milwaukee office. The documents in question were four purchase orders from an educational institution (Cooperative Educational Service [CESA] #12, based in Ashland, Wisconsin). The purchase orders were dated April 28, 2004 and requested delivery to schools in four different cities. The specified delivery date was in the period between July 1, 2004 and August 13, 2004.

Items purchased by CESA included facial tissue, toilet tissue, turntowels, antibacterial soap, ice melt and insulated cups. The specified supplier was Tojahu Paper Supply Company. The address listed for Tojahu was the employer's Green Bay office address. The phone number was the employee's private cellular telephone number. On one of the invoices, an individual had handwritten "Attn: Brad Bain" (the employee's name).

When the chief operating officer received copies of these purchase orders, he called Tojahu's office number. The employee answered. The chief operating officer asked if this was Brad Bain from Tojahu Paper Supply Company and he said yes. The chief operating officer then asked if he was the same Brad Bain employed by the employer. The response was dead silence. When the chief operating officer pushed him on it, he admitted that he was the same Brad Bain. The chief operating officer asked the employee about the purchase orders and sales to CESA #12. The employee denied making these sales. The chief operating officer told him he would give the employee time to think the matter over and instructed the employee to call him back.

The employee returned the call and told the employer Ms. Grassl was involved with Tohaju Paper. The employee ultimately told the chief operating officer that he had made some deliveries for Tojahu. The chief operating officer discharged the employee for engaging in competition with the employer. Shortly thereafter, the chief operating officer also discharged Ms. Grassl.

At the hearing, the employee testified that he knew Tojahu Paper was a third business entity owned by Ms. Grassl's boyfriend.

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

The employer argued that the employee's discharge was for misconduct because he was engaged in a business in competition with the employer. The commission agrees.

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 denied engaging in a competing business and indicated that he merely, as a volunteer, helped his father make a delivery. However, the commission did not find the employee's testimony credible. Further, the paperwork demonstrates that the employee sold supplies to CESA #12 using the employer's office address and the employee's cellular telephone number. The purchase orders contained the employer's Green Bay office address. While someone else may have made the sales, it is not reasonable that someone else would have given Tohaju the employee's cellular telephone number as a contact number. The employee further admitted making deliveries for the competitor, though he testified that he was merely assisting his father. The commission infers from the evidence in the record that the employee was engaged in a business that competed with the employer's business. Further, the chief operating officer called his cellular telephone number and the employee answered, and admitted that he was the Brad Bain from Tojahu Paper.

The employer had no written non-compete agreement. However, even in the absence of a non-compete agreement, clearly, engaging in a competitive business with an employer is harmful to the employer's interests.

The employee's actions in working for a business that competed with the employer demonstrated such a willful and substantial disregard of the employer's interests as to constitute misconduct connected with his work.

The commission therefore finds that in week 3 of 2005, the employee was discharged and that his discharge was for misconduct connected with his work, within the meaning of Wis. Stat. § 108.04(5).

The commission further finds that the employee was paid benefits in the amount of $329 per week for each of weeks 4 through 10 of 2005, and for each of weeks 14 through 32 of 2005, amounting to a total of $8,554; 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.

The decision of the administrative law judge is reversed. Accordingly, the employee is ineligible for benefits beginning in week 3 of 2005, 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 his weekly benefit rate which would have been paid had the discharge not occurred. The employee is required to repay the sum of $8,554 to the Unemployment Reserve Fund. The initial Benefit Computation (Form UCB-700), issued on January 17, 2005, is set aside. If benefit payments become payable based on other employment, a new computation will be issued as to those benefit rights.

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 other wise chargeable to a contributing employer's account shall be charged to the fund's balancing account.

Dated and mailed August 26, 2005
bainbr . urr : 145 : 4  MC 610.04

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

The commission discussed witness credibility and demeanor with the ALJ who held the hearing. The ALJ indicated that she did not have any strong recollections of the demeanor of the witnesses. She did note that there was nothing in the employee's demeanor that made the ALJ think that he was lying. However, the commission when reviewing the record, infers from the totality of the circumstances that the employee was engaged in a competing business with the employer.

cc:
Attorney Arthur F. Radke
Attorney Timothy W. Feeley

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