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

BRIAN F KAPLAN, Employe

KILGUST MECHANICAL INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 98004239MD

On October 3, 1998, the Department of Workforce Development issued an initial determination which held that the employe quit but not for a reason which would allow the immediate eligibility for unemployment insurance. The employe filed a timely request for hearing on the adverse determination, and hearing was held on November 9, 1998 in Madison, Wisconsin before a department administrative law judge. On November 13, 1998, the administrative law judge issued an appeal tribunal decision affirming the initial determination. The employe filed a timely petition for commission review of the adverse appeal tribunal decision, and the matter now is ready for disposition.

Based upon the applicable law and the records and other evidence in the case, the commission issues the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employe worked as a co-owner of a small corporation, owning 20 percent thereof. His last day of work was July 7, 1998 (week 28), when he agreed to resign his ownership/employment with the corporation. The issue is whether the employe's separation from employment with the employer was a quit or a discharge. The commission believes it was a discharge, and so reverses the appeal tribunal decision.

As of his last day of work, the employe owned 20 percent of the employer's stock, and was vice president and treasurer. The employer's president owned 40 percent of the stock. A third individual also owned 20 percent of the stock, and two more owned 10 percent each. All of the stockholders were directors and also employes, and were unrelated.

On July 7, the employe was called to a meeting at the offices of the employer's lawyers, ostensibly to discuss a possible sale of the company with the company's attorney. When he arrived, he found the other shareholders already assembled. The president advised him that the potential buyer would offer employment contracts to all of the shareholders except the employe if the purchase was consummated. The president also stated that, even if the sale was not accomplished, the employe's employment would be terminated. The employe then stated that he would resign if the parties could negotiate a contract for repurchase of his stock and provide him with certain employe benefits. He and the employer subsequently negotiated a separation and stock repurchase agreement which was made effective July 7, 1998.

The issue in this case is whether the employe voluntarily terminated his employment or was discharged by the employer. The commission concludes that it was a discharge by the employer, not for misconduct within the meaning of Wis. Stat. § 108.04 (5), and the commission so finds.

This is the scenario the employe faced. He was called to a meeting he expected to be about a transition by his corporation to the new ownership, but which would include his and the remaining owners' staying on to work for the new corporation. When he arrived at the meeting, the remaining four owners were already present, and the president informed the employe that those four owners, but not the employe, would be getting contracts of employment from the new owner. The president then told the employe that, even if the sale were not to go through, the employe's employment was terminated. The president told the employe that if he did not resign he would be terminated with cause. Neither at this point nor at any other in the conversation, did any other members of the corporation's board of directors challenge the president's assertions or, indeed, say anything at all.

The separation from employment was a resignation by the employe only in form. Where, as here, a resignation is offered in lieu of a discharge by the employer, the employer remains the moving party in the separation and the separation is properly characterized as a discharge and not as a quit. This is exactly the situation the employe faced.

DECISION

The appeal tribunal decision is reversed. Accordingly, the employe is eligible for unemployment insurance if he is other qualified.

Dated and mailed: February 16, 1999
kaplabr.urr : 105 : 3 VL 1007.15

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

NOTE: The commission conferred with the administrative law judge before determining to reverse the appeal tribunal decision in this case. As does the commission, the appeal tribunal decision also accepted as credible the employe's testimony. The administrative law judge did not believe, however, that the employe had sufficient concrete evidence as to the positions of the remaining members of the board of directors as to the employe's continued employment under the new ownership. It is true that some evidence as to the positions of board members is relevant, when it is votes by boards that terminate one's continued employment. In this case, though, the scenario is such that the outcome was clear. The president did not indicate to the employe he would recommend the employe's discharge. The president indicated that the employe would not be working for the corporation's new ownership, and documentation prepared by the new ownership confirmed that assertion. The silence of the remaining board members is sufficient in these circumstances, to have made it clear to the employe that his employment with the corporation was at an end, one way or another.

cc: ATTORNEY GEORGE B STROTHER
KREKELER & SCHEFFER

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