Employers have the right to challenge unemployment compensation when an employee commits misconduct.  The standard legal advice in Minnesota is that the bar for disqualifying misconduct is very high.  As a consequence, challenging unemployment compensation has been regarded as difficult or ill-advised in all but egregious cases.  But recent Minnesota appellate decisions show that disqualification is very fact-specific and, perhaps, the bar is not as high as commonly thought:

• A jewelry store manager who authorized a subordinate to purchase jewelry under her boyfriend’s name to meet her sales quota, and then return it the same day, committed disqualifying “misconduct.”  Tietz v. Rogers Enterprises, Inc., A11-1574, 2012 WL 1914109 (Minn. Ct. App. 2012).
• A mail carrier who took a single piece of mail with a gift card and used it for his own benefit was disqualified.  Brenna v. U.S. Postal Service, A11-1252, 2012 WL 2202968 (Minn. Ct. App. 2012).
• An employee who refused to sign documents acknowledging a disciplinary action was on that basis barred from benefits.  Schneeweiss v. Schwan’s Consumer Brands, Inc., A11-1709, 2012 WL 2505815 (Minn. Ct. App. 2012).
• An employee who violated the company’s work rules by use of profanity in the workplace, after several incidents and prior warnings, was denied unemployment compensation benefits even though profanity was apparently common at the workplace.  DeVilliers v. SVF Co-Op, A11-1228, 2012 WL 1070101 (Minn. Ct. App. 2012).
• Even common absenteeism is meeting the bar: an employee, who had been given at least one written warning for tardiness and then missed work because her car had been towed was deemed to have been disqualified based as “misconduct.”  Franklin v. Goodwill Industries, Inc., A11-1466, 2012 WL 7657628 (Minn. Ct. App. 2012).

None of these fact situations seem particularly egregious and could easily have been initially regarded by the employer as not meeting the bar necessary to mount a successful challenge.

Takeaways:  The common advice about the difficulties of opposing an unemployment claim on a misconduct basis may be worth a second look given these and other recent cases.  A Minnesota employer with a “close-call” situation should consider working with legal counsel to identify any analogous precedent and make an informed decision about challenging employment compensation in what may be a new era of a more favorable interpretation of misconduct disqualification for the employer.

Not in Minnesota.  Minnesota law states that “[a]ny agreement by an individual to waive, release, or commute rights to unemployment benefits or any other rights under the Minnesota Unemployment Insurance Law is void.”  See Minn. Stat. § 268.192.  The law further states that “[a]ny agreement by an employee to pay all or any portion of an employer’s taxes, is void,” and that “[n]o employer may directly or indirectly make or require or accept any deduction from wages to pay the employer’s taxes, require or accept any waiver of any right, or in any manner obstruct or impede an application or continued request for unemployment benefits.”

Takeaway:  Employers should be cautious of any arrangement in which an employee proposes that he or she will not seek unemployment benefits in exchange for something else.  That type of agreement is unenforceable under Minnesota law.  Employers also generally cannot agree not to contest unemployment benefits in exchange for an employee quitting or leaving employment.

The Minnesota legislature recently passed a law that prevents employers and former employees from enforcing agreements in which the employer agrees not to contest the former employee’s eligibility for unemployment benefits.  The legislation revised Minn. Stat. § 268.192 to provide that:

An employer may not make an agreement that in exchange for the employer agreeing not to contest the payment of unemployment benefits, including agreeing not to provide information to the department, an employee will:

(1) quit the employment;

(2) take a leave of absence;

(3) leave the employment temporarily or permanently; or

(4) withdraw a grievance or appeal of a termination.

See S.F.No. 2224.  The legislation further states that “[a]n agreement that violates this subdivision has no effect under this chapter.”  The law took effect on July 1, 2012.

Takeaway:  Under Minnesota law, agreements by an employer not to contest a former employee’s eligibility for unemployment benefits are now unenforceable.

Under Minnesota law, one of the reasons a terminated employee may be found ineligible for unemployment insurance benefits is if the employee was terminated for “employment misconduct.”  Minn. Stat. § 268.095, Subd. 4.

Employment misconduct is defined as “any intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly: (1) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee; or (2) a substantial lack of concern for the employment.”  Minn. Stat. § 268.095, Subd. 6(a).  Whether the conduct in which the employee engaged was only a single incident is an important fact in determining whether the conduct rises to the level of employment misconduct, but is not in itself decisive.

The statute expressly states that the following types of conduct do not qualify as employment misconduct:

1. Conduct that was a consequence of the applicant’s mental illness or impairment;
2. Conduct that was a consequence of the applicant’s inefficiency or inadvertence;
3. Simple unsatisfactory conduct;
4. Conduct an average reasonable employee would have engaged in under the circumstances;
5. Conduct that was a consequence of the applicant’s inability or incapacity;
6. Good faith errors in judgment if judgment was required;
7. Absence because of illness or injury of the applicant, with proper notice to the employer;
8. Absence, with proper notice to the employer, in order to provide necessary care because of the illness, injury, or disability of an immediate family member of the applicant;
9. Conduct that was a consequence of the applicant’s chemical dependency, unless the applicant was previously diagnosed chemically dependent or had treatment for chemical dependency, and since that diagnosis or treatment has failed to make consistent efforts to control the chemical dependency; or
10. Conduct that was a consequence of the applicant, or an immediate family member of the applicant, being a victim of domestic abuse.

Minn. Stat. § 268.095, Subd. 6(b).

Takeaway:  Knowing what constitutes employment misconduct can help employers know when it is appropriate to oppose a former employee’s application for unemployment benefits and when the employer’s resources could be better focused elsewhere.

What are common considerations a Minnesota employer faces when determining whether to oppose a former employee’s application for unemployment compensation?

Let’s say the employee was involuntarily terminated for continuous workplace rule violations but when told, the employee accused you of discrimination or retaliation or some other wrongful discharge.  You then get the notice of filing for UI benefits from the Minnesota Department of Employment and Economic Development, which will provide you the opportunity to determine whether you will oppose benefits.  There are definitely pros and cons to opposing unemployment benefits.  Here are some factors to bear in mind:

• Are you likely to win?  The standard for disqualification for benefits because of “misconduct” is either:  (i) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee; or (ii) a substantial lack of concern for the employment.  See Minn. Stat. § 268.095, Subd. 6.  Simple unsatisfactory conduct does not satisfy the standard. It’s important to remember that unemployment compensation is an insurance plan the employee has paid into and, therefore, the presumption is that benefits are payable if he or she didn’t “reject” employment by quitting or willful misconduct.
• Do I need to “build a record” of my reasons for termination at the unemployment compensation stage in case the employee subsequently files a discrimination charge or sues?  Probably not.  The Minnesota Unemployment Compensation Statutes provide that there is no “collateral estoppel” applied to unemployment compensation hearings – in English that means that a determination made in an unemployment compensation matter cannot legally bind a finding in a subsequent wrongful discharge or discrimination case between the parties.  Testimony from an unemployment hearing also generally cannot be used in other proceedings, except proceedings initiated by a local, state, or federal human rights agency with enforcement powers (like the Equal Employment Opportunity Commission or the Minnesota Department of Human Rights) or by the Department of Employment and Economic Development.   As a result, there is some limited risk that sloppy, inaccurate or otherwise damaging testimony could come back to haunt you in certain types of proceedings.  See Minn. Stat. § 268.105, Subd. 5–6.
• Will opposing unemployment compensation be prudent?  If you have a good basis to oppose the applicant’s eligibility and can put the effort into preparing your case, challenging unemployment compensation could enflame the former employee and send him or her to the EEOC, MDHR, or an attorney to start litigation on some wrongful discharge basis.  Angry terminated employees may lose their ardor to sue if they are getting unemployment compensation and getting on with their life.  Sometimes “penny wise/pound foolish” is the deciding factor for the prudent employer.

Takeaway:  These and several other important considerations should be taken into account when an employer is determining whether to oppose unemployment compensation after a volatile or complex employment termination.  Counsel can always help with the “think-through.”