P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)



Claim No. 90049029

Administrative law judge James G. Lawrence issued his findings of fact and order in this case on May 26, 1995, following a hearing on May 2, 1995. The applicant submitted a petition for commission review of the administrative law judge's findings and order. Thereafter, the employer submitted a reply to the petition for review.

Prior to the hearing, the employer conceded jurisdictional facts. A compensable injury was found and compensation ordered in earlier administrative decisions described below.

The issue at the hearing before ALJ Lawrence and now before this commission is whether the employer violated sec. 102.35 (3), Stats., in connection with its discharge of the applicant.

The commission has carefully reviewed the entire record in this case, including the written argument submitted by the parties. After consulting the administrative law judge concerning the credibility and demeanor of the witnesses, the commission hereby sets aside his findings of fact and order, and substitutes the following therefor:


1. Procedural background.

This case arises from the applicant's allegation of a work injury occurring on March 12, 1990. The employer and its insurer disputed the work injury, so a hearing was held before administrative law judge H.F. Benkert in August 1991 on the issue of whether the employer and its insurer were liable under the workers compensation law. Following the hearing, ALJ Benkert issued a decision on September 9, 1991, finding the employer and its insurer liable for the work injury. More specifically, ALJ Benkert found a compensable work injury with a permanent partial disability at 5 percent compared to disability to the body as a whole. The commission affirmed ALJ Benkert's decision on February 12, 1992.

A second hearing was held before administrative law judge Janine Smiley in February 1993 on whether to impose upon the employer or its insurer a bad faith penalty under sec. 102.18 (1)(bp), Stats., a delayed payment "penalty" under sec. 102.22 (1), Stats., or both. Following this hearing, ALJ Smiley issued a decision on March 30, 1993, imposing a bad faith penalty against the employer. ALJ Smiley imposed the penalty based on misrepresentations made by the wife of the employer's owner during the investigation of the applicant's claim, including her misrepresentation to the insurer that the applicant had not worked on the date of the injury. ALJ Smiley's 1993 decision was modified by the commission to include a bad faith penalty against the insurer as well, and delayed payment "penalties" against both the employer and the insurer. The commission's decision on that matter was dated May 4, 1994.

The issue now before the commission arises from the applicant's claim that his discharge violates sec. 102.35 (3), Stats., the "unreasonable refusal to rehire" provision. Thus, the hearing before ALJ Lawrence is the third involving these parties. In their written argument to the commission in this appeal, the parties agree that ALJ Lawrence took administrative notice of the hearing before ALJ Smiley. The employer also invites the commission to review the testimony at the hearing before ALJ Benkert in the third paragraph of its reply to the petition for review in this case. The applicant concurs in this request, by letter from his attorney to the commission dated June 8, 1995.

2. The applicable law.

As noted above, this case arises under sec. 102.35 (3), Stats., which provides as follows:

102.35 (3) Any employer who without reasonable cause refuses to rehire an employe who is injured in the course of employment, where suitable employment is available within the employe's physical and mental limitations, upon order of the department and in addition to other benefits, has exclusive liability to pay to the employe the wages lost during the period of such refusal, not exceeding one year's wages....

The "unreasonable refusal to rehire" statute applies to unreasonable discharges following a work injury, as well as simple failures to rehire.

In an unreasonable refusal to rehire case, an applicant has the burden of proving he or she was an employe with a compensable injury who was denied rehire or discharged. Once that is shown, the burden is on the employer to show reasonable cause for the failure to rehire or for the discharge. The employer may establish "reasonable cause" by showing that the work injury prevents the applicant from doing available work, or that the employer discharged for some valid reason unrelated to the injury such as poor performance or a business slowdown. However, when an injured employe is eventually discharged, the employer must show that there was no bad faith on its part to evade sec. 102.35 (3), Stats., and that the discharge was actually for the asserted good cause. Thus, an employer who establishes poor performance by an injured worker may still be liable under the statute, if the performance concerns were only a pretext for the discharge.

Finally, the supreme court and court of appeals have held that sec. 102.35 (3), Stats., "must be liberally construed to effectuate its beneficent purpose of preventing discrimination against employes who have sustained compensable work-related injuries." Great Northern Corp. v. LIRC, 189 Wis. 2d 313, 317 (Ct. App., 1994), citing West Allis School Dist. v. DILHR, 116 Wis. 2d 410, 422 (1984). In addition, the law applies even where a worker is fired only in part because of the work injury. Great Northern, at 189 Wis. 2d 318-19.

3. Substantive facts and discussion.

The substantive facts in this case may be briefly stated. The applicant worked as a furniture store manager for the employer. He was hired in November 1989 with a six month probationary period. As noted above, the applicant injured his back at work on March 12, 1990. Shortly after the work injury, the employer's owner fired him at a meeting on March 31, 1990. The applicant testified that the employer's owner simply handed him a check and told him he was closing the store. However, the applicant testified that the employer replaced him with a new manager, and contends that he was really fired because of his work injury. The owner admits discharging the applicant without telling him why he fired him, apparently because he read an article on worker's compensation indicating that it was best to not explain a discharge.

Under these facts, the applicant has met his burden of proving that he was the employer's employe, that he suffered a compensable work injury, and that he was subsequently discharged. The burden thus shifts to the employer to show a reasonable cause for the discharge.

The employer does not claim that the injury itself provided a reasonable basis for the discharge in this case. Rather, the employer asserts that the applicant was not doing his job, and that he was fired for poor performance.

The owner offered hearsay recitals concerning four customers who contacted him and complained about the applicant's performance. He testified morale among the manager's subordinates was low, causing some employes to quit. He also testified that the applicant did not do his managerial duties, particularly with respect to advertising, and bothered the owner with small details. The owner also testified that the applicant lied about where he was while on work hours on occasion, and did not follow credit policies. He also offered a note the applicant wrote, apparently for internal purposes, which contained a vulgarity.

In addition, the owner offers unsigned notes criticizing the applicant's job performance, which the owner alleges he made during performance reviews given in the course of the applicant's employment. For his part, the applicant testified these pre-discharge reviews did not take place.

Finally, the owner testified to what seems to be a formidable defense against a claim under sec. 102.35 (3), Stats.: that when he fired the applicant on March 31 for poor performance during his probationary period he was unaware of the work injury. According to the owner, he did not find out until April 2 that the applicant had been hurt at work.

However this testimony is severely undercut by a "first report of injury" form stating that the employer learned of the injury on March 29, two days before the discharge. The owner testified at the 1993 hearing before ALJ Smiley that he actually first learned of the injury on April 2, but pre-dated the form to help out the applicant. However, in her 1993 decision, ALJ Smiley rejected that testimony and found credible the applicant's testimony that he told the owner about the injury shortly after it happened in mid-March.

ALJ Smiley's finding on this point was affirmed by this commission as described above. Her finding was supported not only by her own impression of witness credibility and demeanor, but also by the owner's testimony at the 1991 hearing before ALJ Benkert. At that proceeding the owner testified that the "first report form" was completed in late March.

Moreover, the commission finds it incredible that the owner would deliberately falsify a worker's compensation form to help out a worker he had just fired for poor performance. For all these reasons, the commission cannot accept the owner's testimony that he did not find out about the work injury until April 2.

Of course, the fact that the owner was aware of the work injury at the time of the discharge does not mean the discharge could not have been solely motivated by poor performance. However, if that were the case, one would expect the owner to have simply said straight out that he was firing the applicant for performance, regardless of when he learned of the injury. Even so, however, the employer offered no testimony from coworkers or customers to support its efforts to meet its burden of proof on this issue.

More importantly, though, the owner denied knowledge of the injury at the time of the discharge, when prior testimony indicates otherwise. This, coupled with the owner's admitted failure to explain the discharge to the applicant on March 31, leads the commission to conclude that the employer failed to meet its burden of proving it had reasonable cause for discharging the applicant under sec. 102.35 (3), Stats. Indeed, the commission makes the affirmative finding that the employer's asserted reason for the discharge, poor performance, was a mere pretext insufficient to preclude liability under sec. 102.35 (3), Stats.

4. The award.

The remaining issue is the amount of the employer's liability. According to sec. 102.35 (3), Stats., in the event of an unreasonable discharge, the employer has exclusive liability to pay the employe for lost wages not to exceed one year's wages. The commission has previously interpreted this to be a monetary, not temporal limit. Thus, an employe who returns to lower-paying employment before collecting all of his "one year's wage" may continue to collect lost wages attributable to the unreasonable discharge until the full "one year's wage" is paid, even though the payments may extend beyond 12 months.

In this case, the applicant testified that, at his rate of pay, one year's wages would equal $36,000. This is borne out by Exhibit A, a Xerox copy of an employment agreement signed by the applicant and the owner establishing a monthly salary of $3,000. The owner's testimony that the applicant's salary was $2,500 per month is rejected.

The applicant also testified that following his discharge on March 31, 1990, he remained unemployed or earned no income until February 1, 1991. Thereafter, he secured a job paying $1,500 per month. However, the synopsis of the hearing testimony does not indicate how long he worked at that wage. Indeed, the applicant testified at the August 1991 hearing before ALJ Benkert that he was then earning significantly more than $3,000 per month. In short, the record provides an insufficient basis for assessing a penalty based on lost wages after January 31, 1991.

On this basis, then, the commission finds the employer exclusively liable under sec. 102.35 (3), Stats., in the amount of $30,000 (ten months of lost wages at $3,000 per month.)

If the applicant experienced additional wage loss attributable to his discharge from the employer, he may file an application to recover the lost wages. Any additional payments, however, when added to the $30,000 ordered hereunder, may not exceed a total of $36,000. This order is therefore left interlocutory to permit the recovery of an additional $6,000 lost wages, if actually incurred.

Finally, the applicant approved the protection of a twenty percent attorney fee under sec. 102.26, Stats., in his August 8, 1990 application alleging a violation of sec. 102.35 (3), Stats. The attorney fee in this case equals $6,000, which shall be paid in 30 days. This leaves $24,000 to be paid to the applicant, also within 30 days.

NOW, THEREFORE, the Labor and Industry Review Commission makes this:


The findings and order of the administrative law judge are reversed. Within 30 days from the date of this interlocutory order, the employer shall pay both of the following:

(1) To the applicant, Gregory L. Bailey, the sum of Twenty-four thousand dollars and no cents ($24,000.00) under sec. 102.35, Stats.

(2) To the applicant's attorney, Bradley C. Lundeen, the sum of Six thousand dollars and no cents ($6,000) as attorney fees.

Jurisdiction is reserved to permit further hearings, orders and awards, to the extent permitted under this decision.

Dated and mailed November 7, 1995
ND 7.27 7.33

Pamela I. Anderson, Chairman

Richard T. Kreul, Commissioner

David B. Falstad, Commissioner


The commission conferred about witness credibility and demeanor with the administrative law judge who presided at the hearing in this case. Transamerica Ins. Co. v. ILHR Department, 54 Wis. 2d 272, 283-84 (1972). The administrative law judge recalled that the applicant had a cocky, over-confident attitude at the hearing, and used foul language. He also stated that it was clear the owner was angry with the applicant concerning the claim.

The commission is certain that the administrative law judge accurately described the parties' respective demeanors. Further, the commission certainly condones neither the applicant's attitude nor his language, both of which no doubt aggravated an already contentious situation. However, given the amount of ill-feeling evident in the record of both this hearing and the hearing before ALJ Smiley, the commission concludes that neither the applicant's attitude nor the owner's anger should be used to gauge credibility in this case. The commission believes the inconsistencies in the owner's testimony provided a better basis for reconciling the conflicts in the testimony.



Appealed to Circuit Court. Affirmed February 5, 1997.

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