Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance

Subject: Koss Corporation v. DILHR and William Gray, Case No. 153-261 (Wis. Cir. Ct., Dane Co., July 5, 1977)

Digest Codes: MC 630.14  PC 740 

The employee was arrested at work on a charge of stealing property from the employer, and later that day he was discharged. The department determination found the employee had stolen from the employer and was discharged for misconduct.  The employee appealed.  At the hearing, the employer offered only hearsay evidence in support of the allegation that the employee stole from it, and the employee denied stealing. The Appeal Tribunal allowed benefits because no competent evidence of theft had been submitted.  The employer timely appealed the Appeal Tribunal decision, arguing in part that the employee was then due to appear in court on the pending criminal charges and was expected to plead guilty, and asking that the hearing be re-opened for the taking of more evidence once the outcome of the criminal charges against the employee was known.  Subsequently, the employer filed a certified copy of the employee's guilty plea and the judgment roll in the criminal proceeding showing his conviction.  Some time thereafter, the Commission issued a decision denying the employer's request for further hearing and affirming the Appeal Tribunal decision.

The employer appealed to circuit court, arguing that the evidence at the hearing would support a conclusion of misconduct, and arguing in the alternative that the department acted in excess of its powers in refusing to grant further hearing. 

Held:  The commission's decision is set aside.  There is no merit to the argument that the evidence at the hearing would support a conclusion of misconduct. A finding of theft can not be grounded on hearsay such as was offered by the employer.  Outside of that hearsay, there was insufficient circumstantial evidence to support a finding of theft. The crucial issue, however, is whether the commission acted in excess of its powers in refusing to grant further hearing. The court concludes, that it did.

The commission's statutory authority under the UC Act to set aside decisions upon grounds of mistake or newly discovered evidence is similar to that conferred upon it in the WC Act,  about which the Supreme Court said in Moore v. Industrial Comm., 4 Wis. 2d 208, 89 N.W. 2d 788 (1958), "The above statute confers upon the commission the power 'on its own motion' to set aside an order or award upon the ground of newly discovered evidence. We deem it to be implicit in such statute that a party may make such motion."  It is discretionary with the commission whether to grant such a motion. Christnovich v. Industrial Comm., 257 Wis. 235, 237, 43 N.W. 2d 21 (1950). It requires a flagrant abuse of discretion in denying such a motion for it to constitute action on the part of the commission in excess of its powers, Moore, supra, at page 218; Nelson Mill & Agri-Center, Inc. v. ILHR Department, 67 Wis. 2d 90, 226 N. W. 2d 435 (1975).

Under Naden v. Johnson, 61 Wis. 2d 384, 212 N.W. 2d 585 (1973), the guidelines for granting a new trial for newly discovered evidence are that  (1) the evidence must have come to the moving party's knowledge after a trial;  (2) the moving party must not have been negligent in seeking to discover it;  (3) the evidence must be material to the issue;  (4) the testimony must not be merely cumulative to the testimony which was introduced at the trial; and (5) it must be reasonably probable that a different result would be reached on a new trial.  The court here is of the opinion that the evidence of the employee's guilty plea to the theft charge meets all the above stated requirements for newly discovered evidence. There was no negligence on the employer's part in not presenting such evidence at the hearing. 

The department contends that facts arising after the trial do not come within the rule of newly discovered evidence.  If this is the rule in the situation of a previously held court trial, it ought not to be applicable to UC and WC proceedings where the request to allow further hearing is presented to the commission before it has reviewed the decision of an examiner. In this situation there is no necessity to grant a new trial in the sense such term is used in court actions, but all that is necessary is to direct the examiner to hold a hearing to receive the new evidence sought to be adduced and make additional or modified findings, if required by such evidence. 

In determining whether the refusal to allow the further evidence (of the employee's guilty plea) constituted a flagrant abuse of discretion, it should be noted that administrative agencies, as well as courts, should be concerned that their actions do not constitute a patent denial of justice. Here the refusal to receive such evidence has resulted in a person who was discharged for stealing his employer's property, and has pled guilty to such charge in a criminal prosecution, is awarded unemployment compensation on the ground he was not guilty of misconduct. It is contrary to public policy and the objective of the UC Act to award unemployment compensation to an employee who has admitted by his plea of guilty that he stole the property of his employer, the very act for which he was discharged. It is a result that tends to bring the whole system of administering justice under disrepute. The Court has no hesitation in concluding that the  refusal to grant the application to receive the additional evidence constituted a flagrant abuse of discretion.

Please note that this is a summary prepared by staff of the commission, not a verbatim reproduction of the court decision.

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