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

MARY A SCHNEIDER-CHENEY, Employee

MARRY-ME BRIDAL INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 05608880MW


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 thirteen years as a salesperson, and manager for the employer, a bridal shop. She was also a 50% owner of the business. Her last day of work was September 30, 2005 (week 40).

In early September of 2005 the employee's long-time business partner and co-owner suffered a stroke. The prognosis appeared to point toward a limited recovery. For a variety of reasons the business partner was indispensable to the functioning of the business. As a result of this, and the fact that the employer had just a few hundred dollars in assets remaining, the employee was unable to maintain the business, so she closed it at the end of September, 2005. The employee took 224 dresses to the junkyard. The employee is attempting to sell other items such as desks, shelves, mirrors, and racks.

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)

The end of the employee's employment originated with her decision that the business would have to be closed. Her unemployment was voluntary because, as owner, she controlled whether she would continue the business. Under the employment insurance law the employee voluntarily terminated her employment.

The issue to be decided is whether the employee's quitting was for any reason constituting an exception to the quit disqualification found in Wis. Stat. § 108.04(7)(a).

Wisconsin Stat. § 108.04(7)(r) provides as follows:

Paragraph (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). In this paragraph, "family corporation" has the meaning given in s. 108.02(15m) and also includes a corporation in which 50% or more of the ownership interest is or was controlled, directly or indirectly, by one or more brothers or sisters of a claimant, or by a combination of one or more brother or sisters and one or more persons specified in s. 108.02(15m)(a).

Wisconsin Stat. § 108.02(15m) provides as follows:

Except as provided in s. 108.04(7)(r), "family corporation" means:

(a) A corporation in which 50% or more of the ownership interest, however designated or evidenced, is or during a claimant's employment was owned or controlled, directly or indirectly, by the claimant or by the claimant's spouse or child, or by the claimant's parent if the claimant is under the age of 18, or by a combination of 2 or more of them; or

(b) Except where par. (a) applies, a corporation in which 25% or more of ownership interest, however designated or evidenced, is or during a claimant's employment was owned or controlled, directly or indirectly, by the claimant.

Wis. Stat. § 108.04(1)(gm), in turn, sets forth the four statutory circumstances pursuant to which an involuntary cessation of a business must occur in order to avoid application of the benefit 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."

The employee did not establish that the corporation was dissolved under ch. 180. Neither the employer corporation nor the employee owner has filed for bankruptcy. The employee did not dispose of 75% or more of the assets of the corporation using one of the methods set forth above.

The commission therefore finds that as of week 40 of 2005, the employee terminated her 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 $624.00 for weeks 46 and 47 and weeks 51 and 52 of 2005, 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 her 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 40 of 2005, 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 weekly benefit rate that would have been paid had the quitting not occurred. The employee is not required to repay the sum of $624.00 to the unemployment reserve fund.

Dated and mailed March 17, 2006
schnema . urr : 132 : 8 :  VL 1054.09  BR 335.01

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, 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: Daniel J. Larocque


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Footnotes:

(1)( Back ) 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 ) Bruecks v. School Service Inc., UI Dec. Hearing No. 04607178MW (LIRC Mar. 2, 2005); 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).

 


uploaded 2006/03/20