KAREN HART (BENNA), Complainant

WAUSAU INSURANCE COMPANIES, Respondent

An examiner of the Department of Industry, Labor and Human Relations issued a decision in the above-captioned matter on February 18, 1986. The examiner concluded that the circumstances of the shoplifting offense for which the Complainant was arrested and convicted were not substantially related to the circumstances of the Complainant's employment, within the meaning of the Wisconsin Fair Employment Act; that the Respondent failed to prove by a preponderance of the evidence that the Complainant was not bondable under a standard fidelity bond or an equivalent bond, within the meaning of the Fair Employment Act; and that the Respondent violated the Wisconsin Fair Employment Act by its discharge of the Complainant in December 1983.

Respondent filed a timely petition for review of the examiner's decision. Briefs were filed on behalf of Respondent by Dean R. Dietrich of Mulcahy and Wherry, S.C., and Dixie Terrell Wilhite, and on behalf of Complainant by James B. Connell of Crooks, Low and Connell, S.C.

Based upon a review of the record in its entirety, and considering the briefs of the parties, the Labor and Industry Review Commission issues the following:

1. The Respondent is an insurance company, doing business in Wausau, Wisconsin.

2. The Complainant, Karen Hart, was first employed by the Respondent in 1971 as a medical claims assistant. As of the time of her termination in 1983, the Complainant was employed in the position of Group Medical Claims Technician.

3. As a Group Medical Claims Technician, the Complainant supervised a group of medical correspondents. The work of the Complainant and of the medical correspondents she supervised was to review medical payment claims made under health insurance policies issued by the Respondent and others and, where appropriate, to authorize payment of the claimed amounts. The work was performed on computer terminals. The Complainant, as a group claim technician, had the authority to release payments of up to $15,000 without having to obtain supervisory approval. The Complainant's authorization was adequate to allow the Respondent's computerized billing system to generate payment checks on claims.

4. At and prior to the time that the Complainant was hired by the Respondent, and continuing until 1977, the Respondent required employes in some if not all positions to be bonded under individual bonds. Until 1977, a standard requirement of employment was the execution of an application for bonding. The position to which the Complainant was hired and in which she worked was such a position, and was subject to a requirement by Respondent that the person in that position be bonded.

5. In 1977 the Respondent altered its bonding practice to change from the use of individual bonds to the use of a blanket bond covering all employes of the company. Since 1977, the Respondent has had in effect a blanket bond which by its terms covers all employes of the company, and which also by its terms is deemed to expire automatically with respect to any employe as to whom the employer obtains knowledge that the employe has engaged in any dishonest or fraudulent act.

6. On Friday, November 25, 1983, Complainant was arrested and cited for theft of a sweater from a retail store in violation of a municipal ordinance of the City of Wausau, Wisconsin. Thereafter on November 25, 1983, she paid a deposit for bond in the amount of $50, plus $7.50 assessment, plus $10 for costs, a total of $67.50. A court date of December 1, 1983, was scheduled. The shoplifting occurred during nonwork hours and off the employer's premises.

7. Following her return to work on Monday, November 28, 1983, Complainant ascertained that Respondent's personnel manual included no provision for involuntary termination of employment as a result of arrest or conviction.

8. Following unsuccessful attempts made on November 28 and 29, 1983, Complainant initiated a conference on Wednesday, November 30, 1983, with Betty Donovan, Respondent's personnel manager for the First Avenue building where Complainant was employed, for the purpose of discovering what effect, if any, her arrest might have on her employment with Respondent. Donovan informed Complain ant that an arrest as it affected employment with Respondent would depend upon not only the company, but on the nature of the crime, how it would affect a person's bondability in the company and the nature of the employe's position. Complainant then admitted to Donovan that Complainant had been arrested, "convicted and paid a fine," refused to further discuss the problem with Donovan and expressed her desire to confer with an attorney. Donovan volunteered to contact an attorney on Complainant's behalf. At Donovan's request Complainant removed herself to a nearby conference room.

9. Donovan immediately contacted Respondent's house counsel, Dixie Wilhite, explained the situation arid was advised by the counsel to ascertain the nature of the action for which Complainant was arrested and further to seek advice from Respondent's risk manager concerning bondability. Donovan was further advised to involve Delores Clancey, Respondent's vice president of group claims administration.

10. Donovan next contacted Respondent's risk manager, Donald Dominski, and inquired how being arrested might affect a person's ability to be bonded or continuance of bonding with Respondent. Donovan was advised that any "dishonest acts, for example shoplifting or stealing," would void coverage under the blanket bond, but that Respondent could request a bond dispensation from the bonding company.

11. Following her discussion with the risk manager, Donovan again met with Complainant, to demand to be informed of why Complainant had been arrested. Complainant admitted shoplifting and volunteered that she was "arrested, convicted and paid a fine." Complainant voiced her thought that "this" would affect her employment. Donovan agreed and instructed Complainant to return to the con room.

12. Following Complainant's departure, Donovan contacted attorney Wilhite to make an up-to-the-minute report. Donovan then conferred with Clancey, reporting that Complainant admitted she "shoplifted, was arrested, convicted and paid a fine." Donovan further informed Clancey of Donovan's discussions with attorney Wilhite arid Respondent's risk manager and of the advice received.

13. Upon receipt of Donovan's report, Clancey determined to discharge Complainant. Clancey considered that in view of Complainant's "conviction," Clancey could not in good conscience support any type of application for continued bonding which could result in Complainant's continued employment.

14. At Clancey's instruction, Donovan met again with Complainant and discharged her.

15. On December 1, 1983, Complainant forfeited bond by failing to appear in court as scheduled.

16. Also on December 1, 1983, Clancey and Donovan met to complete Respondent's termination form. They determined to enter and did enter on the form as the reason for Complainant's termination, "Employee had been arrested and convicted of a crime which made her ineligible for bonding." Thereafter Clancey and Donovan signed the document.

17. The fact that Respondent believed Complainant had been arrested and convicted was a factor in Respondent's decision to discharge Complainant.

18. Respondent considered that throughout her employment, Complainant's job performance was satisfactory and completely honest.

19. Complainant is the only employe discharged by Respondent for actions occurring off-premises during nonwork hours, although Respondent does investigate news items concerning offenses by its employes. Complainant is the only employe discharged for reasons relating to security or bondability. At least one Employe supervised by Clancey dishonestly claimed sick leave frequently and was warned, but neither discharged nor disciplined. At least one of Respondent's employes was arrested for shoplifting, convicted and paid a fine, but was not discharged by Respondent. However, Clancey was unaware of the incident and the particular employe was not under her supervision.

20. No state or federal law or administrative regulation required Complainant, in her position as group medical claims technician, to be bondable. Respondent's personnel manual included no provision for bondability as a condition of employment. only top management employes were informed that employes were bonded.

21. Under the arrangement between the Respondent and its bonding company, the Respondent could request that an exception be made in cases in which the terms of the bond would normally be deemed to expire as to a particular person, and the bonding company could grant such an exception so that, in such cases, bonding would be continued as to that person.

23. Respondent neither investigated nor made any effort to determine with the bonding insurer whether its blanket bond expired as to Complainant's coverage. Respondent made no effort to seek an exception to the existing blanket bond's coverage as to Complainant. Respondent neither investigated nor considered alternative bonding sources.

Based upon the FINDINGS OF FACT made above, the Commission makes the following:

CONCLUSIONS OF LAW

1. Respondent is an employer within the meaning of the Fair Employment Act.

2. Complainant has established by a fair preponderance of the evidence that Respondent discriminated against her because of its belief she had been arrested and convicted when it discharged her on November 30, 1983, within the meaning of secs. 111.321 and 111.322, Wis. Stats.

3. Respondent has failed to prove by a preponderance of the evidence that Complainant was not bondable under a standard fidelity bond or an equivalent bond, within the meaning of sec. 111 .335(1)(c)2 Wis. Stats.

ORDER

1. That the Respondent cease and desist from discriminating against the Complainant because of her arrest and conviction as described herein above.

2. That the Respondent forthwith offer the Complainant reinstatement at a salary equal to that which she would have been earning as of the date of reinstatement had she been continuously employed from the date of her termination through to the date of reinstatement, including any and all general, merit, or other pay raises, and bonuses, if any, which would have been received, and with all other incidents and benefits of employment which the Complainant would have enjoyed had she been continuously employed from the date of her termination through to the date of reinstatement.

3. That the Respondent shall expunge from the Complainant's personnel files any and all references to the Complainant's termination.

4. That the Respondent make the Complainant whole for all losses in pay and benefits that Complainant has suffered by reason of its unlawful conduct by paying to the Complainant the sum Complainant would have earned as an employe from the date of her discharge until such time as the Complainant is reinstated or declines to accept reinstatement. The backpay for this period shall be computed on a calendar quarterly basis with an offset for interim earnings during each calendar quarter. Any unemployment compensation or welfare benefits received by Complainant during the above-described period shall not reduce the amount of backpay otherwise allowable, but shall be withheld by the Respondent and paid to the Unemployment Compensation Reserve Fund or the applicable welfare agency (reimbursement for Unemployment Compensation should be in the form of a check and be made payable to the Department of Industry, Labor and Human Relations and should note the Complainant's name and Social Security number). Additionally, the amount payable to the Complainant after all statutory setoffs shall be increased by interest at the rate of 12 percent simple. Interest shall be computed as follows: for each calendar quarter in the backpay period, the amount of backpay due for that quarter, after statutory setoffs, shall be computed. Interest shall be computed for each such amount from the last day of each such calendar quarter to the day of payment.

Pending any and all appeals from this order, the total backpay due will be the total of all such amounts.

5. That the Respondent pay to the Complainant, by way of a check made payable jointly to Complainant (in the name of Karen Hart Benna) and her attorney, the sum of $2,338.80, representing reasonable attorney's fees and expenses incurred through the date of the examiner's decision. That the Respondent shall also pay reasonable attorney's fees and expenses incurred by Complainant in connection with the petition for review.

6. That within 30 days of the expiration of time within which an appeal may be taken herein, submit a compliance report detailing the specific action taken to comply with the Commission's Order. The compliance report shall be directed to the attention of Kendra DePrey, Labor and Industry Review Commission, P. O. Box 8126, Madison, Wisconsin 53708.

Dated and mailed at Madison, Wisconsin, this 10th day of April , 1987.

/s/ Hugh C. Henderson, Chairman

/s/ Carl W. Thompson, Commissioner

The Commission agrees with the hearing examiner that Complainant was discharged in part because Respondent believed Complainant was arrested and convicted. Clancey's decision to discharge Hart was also based, in part, on Clancey's apprehension for theft of company funds by an individual who shoplifts. ( * )  However, such reason does not obliterate or supersede the part that her perception that Hart had been arrested and convicted played in her decision to discharge Hart.

The Commission has consistently applied the in-part standard to dual motive Fair Employment Act cases. In Muskego-Norway Consol. Jt. School Dist. No. 9 v. WERB, 35 Wis. 2d 540, 562, 151 N.W. 2d 617 (1967), the Supreme Court adopted the in-part standard under the Municipal Employment Relations Act. The court held "an employee may not be fired when one of the motivating factors is his union activities, no matter how many other valid reasons exist for firing him." In WDER v. WERC, 122 Wis. 2d 132, 142-144, 361 N.W. 2d 660 (1985), the Supreme Court rejected the state's advocacy for the "but for" test and applied the "in-part" test to the State Employment Labor Relations Act (SELRA). Considering the purpose of the laws -- the deterrence of illegal discrimination -- the Commission considers that there is no rational basis for distinguishing the Fair Employment Act from MERA or SELRA and, therefore, we have concluded that the "in-part" standard applies to the Fair Employment Act.

Clancey, and only Clancey, made the decision to discharge Hart. (TR 73, 101, 102, 112) Therefore, reasons others may have had for the discharge are not relevant. Clancey testified that the basis for her decision was Hart's admission (that Hart had been arrested, convicted and mid a fine) (TR 120, 127, 128) and the reason for the decision was because she felt the responsibilities of Hart's position (the release of payments) warranted termination (T 74, 103, 106). Clancey further testifies that she would discharge any employe in her division who was convicted of shoplifting. (T 106)

Clancey's testimony establishes a dual motivation for the discharge: 1) arrest and conviction; 2) the nature of Hart's job presented Hart, an admitted thief, with opportunity for theft of funds.

This case is distinguishable from City of Onalaska v. LIRC, 120 Wis. 2d 363 (Ct. App. 1984) (J. Dykman dissenting). In City of Onalaska, the individual, a police trainee, admitted to the employer that he participated in an illegal activity, i.e., racing on a public highway with another vehicle. He was constructively discharged because he participated in the illegal activity, not because he was questioned by the police. The termination occurred before he was officially questioned for investigation of whether or not to pursue a charge against him, and, therefore, was not a discharge because of "arrest record," i.e., information indicating that he had been questioned, apprehended, taken into custody or detention, or held for investigation, arrested, charged with, indicted or tried for any felony, misdemeanor or other offense pursuant to any law enforcement authority. There simply was no arrest record upon which the employer could have relied. The court held that if "the employer discharges an employe because the employer concludes from its own investigation and questioning of the employe that he or she has committed an offense, the employer does not rely on information indicating that the employe has been questioned (by the police), and therefore does not rely on an arrest record as defined in sec. 111.32(5)(h), Stats. (now sec. 111.32(1)).

In this case Clancey did not question Hart. When Clancey made the decision to discharge Hart, Clancey relied completely on information reported to her by Donovan. Information generated from third parties is reliance on an arrest or conviction record. City of Onalaska, 120 Wis. 2d at 367. In addition, Donovan reliably reported to Clancey that Hart had been arrested for an offense, pursuant to a law enforcement authority. There was an arrest record within the meaning of sec. 111.32(1), Wis. Stats.

Although the Commission agrees with the examiner that Respondent's discharge of Hart was a discriminatory discharge, the Commission does not agree with the examiner's rationale concerning the sec. 111.335, Wis. Stats., affirmative defense of substantial relation.

Under sec. 111 .335(1)(a), Wis. Stats., it is not discrimination for an employer to ask an employe about a pending charge. Also under par. (1)(a), it is discrimination because of arrest record to request an employe to supply information regarding a past record unless employment depends on bondability.

In this case Donovan concedes she asked Hart to supply the nature of the charge against Hart. This occurred before Clancey made the decision to discharge. Donovan was asking about a pending charge as the request was made during a conference on November 30, 1983, and Hart was discharged later that day. Hart's court date on the charge was scheduled for December 1, 1983. Therefore the charge was pending and the request for information was not discrimination under sec. 111.335(1)(a), Wis. Stats. Moreover, bondability was not an issue under sec. 111 .335(1)(a), Wis. Stats., because Donovan was not inquiring about a past record.

Under sec. 111.335(1)(b), Wis. Stats., it is not discrimination because of arrest record to suspend from employment any individual who is subject to a pending criminal charge . . . Under par. (1)(b), if an individual is subject to a pending criminal charge and the circumstances of the charge substantially relate to the circumstances of the particular job, the employer may suspend the employe without impunity under the Fair Employment Act. However, both conditions must be met before the affirmative defense is available.

Hart was charged with a municipal ordinance violation. The penalty for such a violation is a forfeiture. "It is clear that '[C]onduct punishable only by a forfeiture is not a crime.' State v. Roggensack, 15 Wis. 2d 625, 630, 113 N.W. 2d 389, 392 (1962); sec. 939.12, Stats." Crawford v. City of Ashland, 134 Wis. 2d 369, 374 (1986). As Hart was not subject to a pending criminal charge, the affirmative defense offered under sec. 111 .335(1)(b), Wis. Stats., was not available to Respondent.

Sec. 111.335(1)(c), Wis. Stats., provides exceptions concerning when a discharge because of conviction record is not discriminatory. Sec. 111.32(3) defines "conviction record" for purposes of the Fair Employment Act as follows:

"(3) 'Conviction record' includes, but is not limited to, information indicating that an individual has been convicted of any felony, misdemeanor or other offense, has been adjudicated delinquent, has been less than honorably discharged, or has been placed on probation, fined, imprisoned or paroled pursuant to any law enforcement or military authority."

On the day of the discharge, Hart had not been convicted or been found, guilty by a court of law of any offense. In addition, she had posted a bond, but had not paid a forfeiture as she had not yet been adjudicated guilty of the municipal ordinance violation. However, Clancey believed Donovan's report to her that Hart admitted Hart had shoplifted, been arrested, convicted and paid a fine. Clancey believed that Donovan's integrity was such that Clancey was certain Donovan's statements concerning Hart were correct. (TR 112) Clancey further believed that up to the point where Donovan reported Hart's statements, the integrity of Hart had been equal to Donovan's. (TR 112) The information Clancey received (that Hart had been convicted and fined) constituted a "conviction record" within the meaning of sec. 111.32(3), Wis. Stats.

Substantial Relation

Under section 111.335(1)(c)1 it is not employment discrimination because of conviction record to terminate from employment "any individual who:

"1. Has been convicted of any . .offense the circumstances of which substantially relate to the circumstances of the particular job . . .;"

Here, too, the defense is available only when the individual has been convicted. ( * )  As Hart had not been convicted at the time of the discharge, the substantially relate defense is not available.

Bondability under Section 111.335(1)(c)2, Wis. Stats.:

The last statutory affirmative defense is provided in sec. 111 .335(1)(c)2 with a pertinent definition in sec. 111.335(1)(d). Under such section, it is not employment discrimination because of conviction record to terminate from employment, any individual who:

"2. Is not bondable under a standard fidelity bond or an equivalent bond where such bondability is required by state or federal law, administrative regulation or established business practice of the employer."

Respondent admitted that no state or federal law or administrative regulation required Hart in her position as medical claims technician to be bondable. Although only upper-management employes were informed that all employes were bonded, and the personnel manual did not mention bonding as a condition of employment, as a matter of business practice Respondent caused its employes to be bonded. Complainant was required to apply for bonding when she applied for a position with Respondent in 1971. Until 1977, employes were separately bonded. After 1977 Respondent caused its employes to be covered by a blanket bond.

The blanket bond provides in section 6: "The coverage of this Bond shall not apply to any Employee from and after the time that the Insured . . . shall have knowledge or information that such Employee has committed any fraudulent or dishonest act in the service of the Insured or otherwise, whether such act be committed before or after the date of employment."

Section 12 of the bond provides: "This Bond shall be deemed canceled as to any Employee: (a) immediately upon discovery by the Insured, . . . of any fraudulent or dishonest act on the part of such Employee, ..."

Respondent's risk manager, Don Dominski, the personnel manager, Betty Donovan, and Delores Clancey, vice president, believed that shoplifting was a dishonest act which voided the bond as to Hart because of her offense of shoplifting.

However, the "bondability" exception provided by the statute does not turn merely on cessation of coverage under an existing standard fidelity bond (assuming the bond was a standard fidelity bond). Section 111.335(1)(c)2 provides in the alternative that the individual not be bondable under an "equivalent bond."

"Bondable" means capable or worthy of being bonded. See definition of the suffix "-able," Webster's Third New International Dictionary, unabridged, 1976, G. & C. Merriam Company, publishers.

Section 111.335(1)(d) defines an "equivalent bond" as follows:

"In this section, 'equivalent bond' includes, but is not limited to, a bond issued for an ex-offender under 29 USC 871 (c) in effect on August 4, 1981."

Section 111.335, Wis. Stats., provides affirmative defenses to an otherwise illegal discriminatory act. The burden is therefore on Respondent to establish such defenses.

In this case Donovan described to Clancey a procedure for obtaining bonding coverage of Hart, i.e., an exception from cessation of the coverage of the blanket bond. However, none of Respondent's personnel contacted the bonding insurer to determine whether or not the bond automatically terminated as to Hart. In addition, Clancey made the determination that no exception would be sought as to Hart with the bonding insurer. .No effort was made to determine whether or not Hart was "bondable" under an "equivalent bond."

Respondent failed to establish that Complainant was not bondable under a standard fidelity bond or under an equivalent bond.

In summation Complainant sustained her burden of establishing a discriminatory discharge because of arrest or conviction record. Respondent then had the burden of proceeding to establish facts necessary to bring itself within any of the statutory affirmative defenses. This it failed to do.

115

DISSENT

I am unable to agree with the result reached by the majority herein and I dissent.

The arrest and conviction section of the Statutes was adopted to prohibit discrimination based on prejudice against people who had arrest or conviction records. The law allows one to refuse to employ or license or to suspend from employment any individual with a pending criminal charge if the circumstances of the job substantially relate to the charge. The law also allows one to refuse to employ, license or to bar or terminate from employment an individual with a conviction record if the offense substantially relates or if the individual is not bondable under a standard fidelity bond, an equivalent bond where it is required by state or federal law, administrative regulation or established business practice.

The law differs in what an employer is allowed to do if the case involves an arrest as opposed to a conviction. The law dealing with arrests is not concerned with municipal ordinance violations but the conviction section allows for discharge for municipal violations.

The majority has decided that this case should be viewed under the arrest section because the Complainant had not technically been convicted until she forfeited her bond by not appearing in court. If the employer had waited two days to fire her the majority believe the employer would then be entitled to use the affirmative defense that the arrest and conviction for shoplifting was substantially related to her work for the employer. I do not find that interpretation of the law to be logical. The employer did not check out the Complainant's admission that she was arrested and convicted for shoplifting and paid the fine:. The Complainant was not disadvantaged by the employer's reliance on her statement. In fact, since the Complainant did not intend to appear in court there could be no result other than conviction in the case.

The law on arrest was intended to require an investigation of the charges so that the employer would not assume the guilt of an individual charged with a crime or depend on unreliable third party information. There is no need to investigate where the individual has made admissions to the employer on her own.

I disagree with the majority on the question of dual motive in this case. I would find that the employer fired the Complainant because the Complainant's act of shoplifting substantially related to her employment. Clancey testified (TR 106) that she would make the same decision regarding any other employes in her division that were convicted of shoplifting "because the employes in our division all have responsibility for money." I would also find that while Clancey had the ultimate authority to make the decision to fire, she relied heavily on Donovan. This is significant because Donovan testified the Complainant asked her if arrest would have an effect on somebody's employment. Donovan explained that not only arrest and conviction but the "whole situation and you would have to look at how it would relate to bonding . . ," (TR 155) The Complainant asked hypothetically about drunken driving and Donovan told her that she didn't think that would make a difference because the Complainant didn't drive a company vehicle or drive on company business. Then the Complainant asked Donovan what if it were drugs? Donovan said "it would depend on the nature of the situation, be it possession or stealing or dealing or whatever." (TR '155 )

It is clear to me that, while the employer talked about "arrested and convicted" for shoplifting, it is the underlying activity--the shoplifting--that is the problem for the employer.

I believe that the shoplifting is substantially related to Complainant's employment and allows the employer the affirmative defense under the conviction section of the Statutes.

While it is not necessary to get to the affirmative defense under the bondable section of the Statutes, I feel I must disagree with the way the hearing examiner applies this section of the law. I do not believe that the employer has a duty to accommodate the Complainant by searching for a new bond where the employe has lost coverage under the blanket bond. I do not believe that an individual who has lost coverage under a blanket bond because of a conviction should be in a better position than one who has not.

The Wisconsin Supreme Court in American Motors Corp. v. ILHR Dept., 101 Wis. 2d 337 (1981), decided that there was no duty upon private employers to accommodate religious practices of their employes because the law at the time did not expressly require it. That law has since been amended but the rationale could apply equally well in this case.

I would find that the employer believed that the arrest and conviction for :shoplifting was substantially related to the Complainant's job and that they believed she was not covered under their blanket bond so they terminated the Complainant. I would not find discrimination in this discharge.

Pamela I. Anderson Commissioner

Appealed to Circuit Court. Reversed, February 10, 1988. Appealed to Court of Appeals, which  aff'd. Circuit Court decision, in part, rev'd. in part, and remanded to LIRC for decision on "substantially related" issue, (Ct. App., Dist. III, unpublished decision, October 11, 1988). [Subsequent LIRC decision]

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Footnotes:

( * )( Back ) Hart's capability of being bonded (or lack of capability) was not a factor in Clancey's decision to discharge. Clancey testified (T 115) that she "could not in good conscience do that (support any type of application for continued bonding which could result in Hart's employment) because of the responsibility that medical claim technicians have for our funds--company funds and the funds of our customers" -- "in view of Hart's conviction."

( * )( Back ) Unlike the definition of "conviction record" in sec. 111.32(3) which permits reliance on "information indicating . . . offense," sec. 111.335(1)(c) clearly states that the individual must be convicted.

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