Supreme Court of Iowa Decision
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Case Title: TONI C. KLEIDOSTY, Appellant, vs. EMPLOYMENT APPEAL BOARD, Appellee.
Date: 03/18/92
Bound Citation:
Summary: No. 65/91-344
Decision: Appeal from the Iowa District Court for Mahaska County,
James P. Rielly, Judge.

Former employee appeals from denial of unemployment
compensation following discharge for off-premises sale of
cocaine. AFFIRMED.

Timothy W. James, Ottumwa, for appellant.

Joe E. Smith, Des Moines, for appellee.

Considered by Harris, P.J., and Larson, Lavorato,
Neuman, and Andreasen, JJ.

LARSON, J.
Toni Kleidosty was an employee of Rolscreen Company in
its Oskaloosa, Iowa, plant when she pled guilty to delivery
of cocaine, a class "C" felony. Rolscreen fired Kleidosty
for violating a company rule that prohibited "illegal,
immoral, or indecent" conduct by its employees. A job
service hearing officer ruled that Kleidosty was entitled
to unemployment benefits, and an administrative law judge
agreed. The Employment Appeal Board reversed in a
two-to-one decision, ruling that Kleidosty's misconduct
caused her unemployment and that her conduct was work
connected. On Kleidosty's petition for judicial review,
the district court agreed. We affirm.
Kleidosty's sale of cocaine occurred on her own
premises and on her own time. It did not involve any other
Rolscreen employees. Based on these facts, the administrative
law judge ruled "the client's violation of the
criminal law in this case had absolutely no connection with her employment."
Rolscreen argues that committing a felony, especially
one involving drugs, constitutes a violation of Rolscreen's
"class 1" rules. Such an act is characterized in
Rolscreen's employee manual as "most serious" and of such
magnitude as "will usually require immediate discharge."
Under the company's rules, class 1 violations include:

2. Illegal, immoral or indecent conduct.
. . . .
8. Drinking alcoholic beverages or using a
controlled substance on Company premises or on
Company time.
9. Selling, giving, trading or possession of
a controlled substance on Company premises at any time.

While rules 8 and 9 relate specifically to controlled
substances, they require that the act occur on company
premises or on company time. Rule 2, dealing with illegal
or immoral conduct, is not restricted to time or place.
Iowa Code section 96.5(2)(a) (1989) provides that:
An individual shall be disqualified from receiving
benefits if the individual has been discharged for
misconduct in connection with employment.

Misconduct has not been defined by statute; however,
this definition is provided by the Department of Employment Services:

Misconduct is defined as a deliberate act or
omission by a worker which constitutes a material
breach of the duties and obligations arising out
of such worker's contract of employment. Misconduct
as the term is used in the disqualification
provision as being limited to conduct evincing
such willful or wanton disregard of an employer's
interest as is found in deliberate violation or
disregard of standards of behavior which the
employer has the right to expect of employees, or
in careless or negligence of such degree of
recurrence as to manifest equal culpability,
wrongful intent or evil design, or to show an
intentional and substantial disregard of the
employer's interests or of the employee's duties
and obligations to the employer.

345 Iowa Admin. Code 4.32(96). Our court has frequently
approved this definition. See, e.g., Larson v. Iowa Dep't
of Job Serv., 474 N.W.2d 570, 571-72 (Iowa 1991); Anderson
v. Warren Distrib. Co., 469 N.W.2d 687, 689 (Iowa 1991);
Higgins v. Iowa Dep't of Job Serv., 350 N.W.2d 187, 189-90
(Iowa 1984); Huntoon v. Iowa Dep't of Job Serv., 275 N.W.2d
445, 447-48 (Iowa 1979).
Under the statutory guide for interpretation of chapter
96, our employment security statute is said to exist for
"the benefits of persons unemployed through no fault of
their own." Iowa Code Sec. 96.2 (1989). This rule of
interpretation and the department's rule defining misconduct
are consistent with the general rule. It is said that
the basic principle at the root of an
unemployment compensation statute, justifying the
exercise of the police power of the state in its
enactment, is that the reserves set aside from the
enforced contributions of employers are to be used
for the benefit of persons unemployed through no
fault of their own. Thus, misconduct within the
meaning of an unemployment compensation act
excluding from its benefits an employee discharged
for misconduct must be an act of wanton or willful
disregard of the employer's interest, a deliberate
violation of the employer's rules, a disregard of
standards of behavior which the employer has the
right to expect of his employee, or negligence in
such degree or recurrence as to manifest culpability,
wrongful intent, or evil design, or show an
intentional and substantial disregard of the
employer's interest or of the employee's duties
and obligations to the employer.

76 Am. Jur. 2d Unemployment Compensation Sec. 52, at 945-46
(1975).
The Employment Appeal Board and the district court
concluded that Kleidosty was not unemployed "through no
fault of her own" but because she committed a crime in the
face of a company rule that expressly prohibited illegal conduct.
Under Iowa Code sections 17A.19(8)(e) and (f), our
review in this case is on error, and the agency's decision
is binding if it is supported by substantial evidence and
based on correct conclusions of law. Larson, 474 N.W.2d at
572; Anderson, 469 N.W.2d at 688.
Kleidosty has pointed to several cases involving
similar acts by an employee off the premises and off
company time that have not resulted in a loss of unemployment
benefits. She points to a lack of evidence showing a
direct connection between her act and the employer's business.
This case, however, does not turn on what adverse
effects Kleidosty's conduct actually had on Rolscreen's
business. Rather, it involves a violation of a specific
work rule prohibiting immoral or illegal conduct, and the
issue under the department's misconduct rule is whether the
act falls within its parameters. An act constitutes
misconduct if it shows a wanton or willful disregard of the
employer's interests, a disregard of standards of behavior
that the employer has a right to expect, or constitutes a
"deliberate violation of the employer's rules." 345 Iowa
Admin. Code 4.32(96).
We believe it is clear under the evidence in this case
that the employer's rules regarding such conduct were clear
and that Kleidosty's act of selling cocaine in the face of
a rule constitutes a "deliberate violation" under the
definition of misconduct.
Denial of unemployment compensation benefits for
conduct off the premises comports with cases decided by
other jurisdictions. See, e.g., In re Bruggemen, 477
N.Y.S.2d 449, 101 A.D.2d 973 (1984) (claimant denied
unemployment compensation based on off-premises sale of
controlled substance); Masom v. Commonwealth Unemployment
Compensation Bd., 528 A.2d 1057 (Pa. Commw. Ct. 1987)
(county employment specialist discharged for drug
possession, an act found to be inconsistent with her job
responsibilities and inimical to her employer's interests);
Dean v. South Dakota Dep't of Labor, 367 N.W.2d 779 (S.D.
1985) (employee fired because of shoplifting arrests,
denied unemployment compensation, found to have committed
act reflecting adversely on employer).
We believe substantial evidence supports the agency and
the district court in their conclusion that Kleidosty's act
constituted misconduct under our administrative rules, and
cases, and that the denial of unemployment compensation was
therefore proper.
AFFIRMED.