Supreme Court of Iowa Decision
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Case Title: EVAN A. BARTELT, Appellant, vs. EMPLOYMENT APPEAL BOARD, Appellee.
Date: 01/20/93
Bound Citation:
Summary: No. 435 / 92-26
Decision: Appeal from the Iowa District Court for Polk County,
Richard A. Strickler, Judge.

Appeal from decision on judicial review denying
unemployment compensation. REVERSED AND REMANDED.

Alan M. Daut, Altoona, for appellant.

Joe E. Smith, Employment Appeal Board, Des Moines, for
appellee.

Considered by McGiverin, C.J., and Harris, Schultz,
Neuman, and Snell, JJ.

HARRIS, J.
After a corporation failed, its president and sole
stockholder, who had also been a salaried employee, applied
for unemployment compensation benefits. The agency
ultimately denied them. This appeal is from a district
court judgment affirming agency action. We reverse and remand.
The facts are straightforward and not disputed.
Evan A. Bartelt, the claimant, was president, sole
stockholder, and an employee of Martin's Automatic Service,
Inc. (Martin's) from July 1983 until February 15, 1990. As
Martin's president, Bartelt filed for bankruptcy under
chapter 7 of the United States Bankruptcy Code on
February 16, 1990. It was officially a voluntary petition,
but Bartelt had no practical choice in the matter.
Involuntary bankruptcy was surely only a few days off. The
corporation's largest supplier and creditor was poised to
seize the majority of the corporation's assets. Bartelt
stated that he acted to protect his other creditors.
The following month Bartelt filed for unemployment
benefits under Iowa Code chapter 96 (1989) and received
them briefly. He was later told by the department of job
service that he was not eligible for benefits. Job service
reasoned that, because Bartelt was responsible for the
corporation's action in petitioning for bankruptcy, he was
responsible for his own loss of employment.
Bartelt unsuccessfully pursued the matter to final
agency action and was directed to repay the benefits he had
received. The district court affirmed the agency on
judicial review. The matter is before us on appeal from that affirmance.
I. Appellate review of an agency's decision is
governed by Iowa Code section 17A.20 (1991). The review is
at law and not de novo. Heatherly v. Iowa Dep't of Job
Serv., 397 N.W.2d 670 (Iowa 1986).
"Unemployed individuals otherwise eligible for
unemployment benefits may be disqualified for benefits
under Iowa Code section 96.5(1)." Wills v. Employment
Appeal Bd., 447 N.W.2d 137, 138 (Iowa 1989). Section
96.5(1) provides that "[a]n individual shall be
disqualified for benefits . . . [i]f the individual has
left work voluntarily without good cause attributable to
the individual's employer . . . ." The section does not
deny benefits where an individual has left work either (1)
involuntarily or (2) voluntarily with good cause
attributable to the individual's employer. Wills, 447 N.W.2d at 138.
The employer has the burden of proving a claimant is
disqualified for benefits. Iowa Code Sec. 96.6(2). We have
adopted the Iowa Administrative Code's definition of
"voluntary quit." Wills, 447 N.W.2d at 138. Iowa
Administrative Code rule 345-4.25 (1991) defines "voluntary
quit" as follows:

In general, a voluntary quit means discontinuing
the employment because the employee no longer
desires to remain in the relationship of an
employee with the employer from whom the employee
has separated.

In Ames v. Employment Appeal Board, 439 N.W.2d 669
(Iowa 1989), we "rejected an analysis which disqualifies
involuntarily separated employees unless the involuntary
leaving is attributable to the employer." Wills, 447
N.W.2d at 137. In other words, (1) involuntary leaving can
be attributable to someone other than the employer, and (2)
when that is the case the employee, if otherwise qualified,
can receive unemployment compensation benefits.
II. Taking the word "voluntary" in its ordinary
meaning, the agency can scarcely be said to have carried
its burden of showing a voluntary quit. We understand
voluntary to entail a free choice. See Margoris v.
United States R.R. Admin., 187 Iowa 605, 608, 174 N.W. 371,
372 (1919) (defining voluntary as "spontaneously, of one's
own free will, without being moved, influenced or impelled by others").
There is no doubt that Martin's, the corporation owned
by Bartelt, had failed. Its main supplier had undertaken
supervision of Martin's retail floor plan and payment plans
to such an extent that involuntary bankruptcy was otherwise
a near mathematical certainty. Bartelt analogizes his
situation to that in Ames, where workers volitionally
refused to cross picket lines on account of picketers'
threats of violence. They nonetheless were allowed to
receive unemployment benefits because their unemployment
was determined to be involuntary. Ames, 439 N.W.2d at
672-75. According to Bartelt, when an outside force over
which neither the employee nor the employer has any control
creates the unemployment, the unemployment is involuntary.
The agency relies heavily on Hanmer v. State, 92
Wis. 2d 90, 284 N.W.2d 587 (1979). In Hanmer each of the
two claimants was an employee, officer, and fifty percent
stockholder of a corporation. There were no other
employees. The complainants jointly made decisions
affecting the business. On the advice of their attorney,
the claimants filed a voluntary petition for bankruptcy.
They testified that prior to filing for bankruptcy their
creditors continually harassed them and threatened a
lawsuit. Bankruptcy schedules listed the corporation's
liabilities as $198,562, and assets as $54,466. It was the
opinion of their attorney that the claimants had no
alternative but to declare bankruptcy. The Hanmer court
was unimpressed, pointing out that the decision to file for
voluntary bankruptcy was carefully considered and
deliberate. The court said:

For us to find a termination for cause under these
circumstances would be to hold that an employee
could create the very cause for which he is
justified in quitting. We decline to do so.

Id. at ___, 284 N.W.2d at 591.

We acknowledge that certain policy arguments support
the Hanmer decision. Although they do not appear in the
case before us, facts can easily be imagined in which a
person engaged as a proprietor of a private business
enterprise could manipulate its failure in such a way as to
gain inappropriate protection. Nevertheless, for reasons
we shall explain, we are not disposed to follow the Hanmer
decision under the facts before us.
The flaw we perceive in the agency's position is this.
Disqualification is attempted by claiming employment was
terminated voluntarily. But voluntariness in the present
case is contrary to fact. If unemployment coverage is
inappropriate under these circumstances, the remedy is not
to pretend there has been a voluntary quit. The remedy is
rather to call for a legislative amendment that would bar
coverage for corporate employees such as Bartelt who are
also owners and officers of the corporation.
Disqualification from benefits stand or fall on the
ground asserted before the agency. Larson v. Employment
Appeal Bd., 474 N.W.2d 570, 572 (Iowa 1991). Whatever else
might be asserted against allowing Bartelt the benefits he
seeks, it has not been established that he voluntarily
quit. Nor, we emphasize, was there any indication that
Bartelt manipulated Martin's corporate affairs just to gain
unemployment benefits. Because a voluntary quit was the
basis for Bartelt's disqualification, the judgment of the
district court must be reversed and the case remanded for
entry of judgment accordingly.
REVERSED AND REMANDED.