ROBERT N GALLAGHER, Employee

STEEL FORMS CONSTRUCTION INC, 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 agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

The decision of the administrative law judge is affirmed. Accordingly, the employee is eligible for benefits beginning in week 5 of 2006, if otherwise qualified. .

Dated and mailed July 11, 2006
gallaro . usd : 115 : 8  3.  MC 610.04

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

On February 2, 2006, the employee was working with his crew on a foundation job for building contractor Todd Nelson.

The employee admits that he told Nelson that he was unhappy that he didn't have a larger crew to do this job, and he and his brother were thinking of starting their own business some day if they "could get it together" and had acquired some four-foot concrete forms.

Nelson interpreted this as a "potential" solicitation of business by the employee and notified the employer. The employer discharged the employee as a result.

An employee owes a duty of loyalty which requires that he refrain from engaging in direct competition with his employer. The commission has generally held that breaching this duty through the active operation of a competing business supports a conclusion of misconduct, but that a mere intention to become self-employed in competition with the employer does not. See, Conway v. A Touch of Country Crafts & Gift Mall, Inc., UI Hearing No. 01601612MW (LIRC Nov. 28, 2001); Kerlin v. Executive Mortgage LLC, UI Hearing No. 01402871MD (LIRC March 6, 2002); Searcy v. Valley VNA Health Systems, Inc., UI Hearing No. 03403974AP (LIRC July 2, 2004); Azarshin v. Home Furniture, Inc., UI Hearing No. 04202739EC (LIRC May 31, 2005).

To determine whether there has been an active operation of a competing business, the commission has looked to such factors as the purchase or lease of business premises, the acquisition of inventory, the hiring of employees, or the active solicitation of customers through advertising or otherwise. See, Searcy, supra. (establishment of corporate structure and existence of business telephone number, without other indicia of active business operation such as advertising, hiring employees, and soliciting clients, does not establish misconduct through breach of duty of loyalty to employer); Boehm v. Downtown TV, UI Hearing No. 88-402052WU (LIRC June 29, 1989)(soliciting customers for a rival business constitutes misconduct); Kerlin v. Executive Mortgage LLC, UI Hearing No. 01402871MD (LIRC March 6, 2002).

The only one of these factors arguably present here relates to the active solicitation of customers. The facts of this case are similar in certain respects to those in Kramer v. ALM Ltd., UI Hearing No. 99001397WU (LIRC July 20, 1999), in which the commission found misconduct where the employee contacted customers of the employer to inquire whether they would be interested in using his services, rather than the employer's, in the event he opened his own business.

However, the facts here are significantly less compelling than those in Kramer. Although the purchase of forms could signal that an individual was prepared to begin accepting customers, the twenty four-foot forms acquired by the employee and his brother here were not of the quantity or the size required to complete even a single foundation job. Moreover, the employee's indirect criticism of the employer and reference to "thinking" of starting his own business some time in the future if he "could get it together," are too vague and indefinite to constitute the active solicitation of business. In Kramer, the employee initiated numerous contacts with customers of the employer and was direct in stating his intentions, i.e., to determine whether any of them would consider leaving the employer and giving their business to the employee if he opened his own business. Here, even Nelson could not ascertain what the employee's actual intentions were in sharing this information with him. When Nelson was asked whether the employee had solicited business from him, he did not answer the question directly, but testified that he "felt uncomfortable," that he "felt the employee had suggested working for me," and that he believed that he was "potentially being solicited" for other business by the employee.

At most, the employee's actions fall within the purview of contemplating, planning, or preparing for competition with the employer. The commission has been consistent in holding that such actions do not constitute the active operation of a competing business and do not support a conclusion of misconduct as a result. See, Zielinski-Tates v. LIRC and Inland Companies, Inc., Case No. 98-CV-531 (Wis. Cir. Ct. Waukesha Co., Jan. 6, 1999); Kerlin, supra.; Barrows v. Diamond Transportation System, Inc., UI Hearing No. 05603288RC (LIRC Aug. 26, 2005).

cc: Attorney Paul F. X. Schwartz

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

uploaded 2006/07/17