IN THE SUPREME COURT OF IOWA
No. 140 / 99-0183
Filed September 7, 2000
JOHN W. LEE,
Appellee,
vs.
EMPLOYMENT APPEAL BOARD,
Appellant,
MITCHELL COUNTY SECONDARY ROADS,
Intervenor-Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for
Polk County, Richard G. Blane II, Judge.
Employer and agency appealed from a district court
ruling on judicial review reversing the agency’s denial
of unemployment benefits to claimant based on miscDECISION
onduct. OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT AFFIRMED.
Richard Ramsey, Des Moines, for appellant.
Mark L. Walk, County Attorney, for intervenor-appe
llant.
John S. Allen and Lois K. Cox, University
of Iowa Clinical Law Program, and Bridget Butler, Myra
Emerson, Tria Lawton-Russell, and Rodney P. Weber,
Student Legal Interns, Iowa City, for appellee.
Considered en banc.
LAVORATO, Justice.
Mitchell County Secondary Roads (county) and the Employment
Appeal Board (agency) appealed from a district court
decision on judicial review reversing the agency’s
decision to deny John W. Lee unemployment benefits
based on misconduct. The county and the agency contended
that the district court erred because there was substantial
evidence to support the agency’s finding of misconWe
duct. transferred the case to the court of appealwhich
s, agreed and reversed. We granted further review
and now hold that there was no substantial evidence
of misconduct. We therefore vacate the court of appeals
decision and affirm the district court judgment.
I. Background Facts and Proceedings.
The county hired Lee on August 30, 198His
2. duties included plowing snow and using a dump truck
to spread gravel and sand during and after snowsto
rms.
On December 5, 1991, Mitchell County Engineer
James Hyde gave Lee an oral warning about his poor
job performance. The written record of the warning
mentioned that Lee had experienced a drop in attitude
and morale and had damaged property but failed to report
the damage. The written record also mentioned that
the county had received several public complaints about
his snowplowing. The written record concluded that
Lee’s “job is apparently of little importance” to him
and that “[i]mprovements need[ed] to be made in atjob
titude, morale, performance, initiative, and desir
e.”
On January 26, 1995, Lee received another
written warning about his job performance. The warning
noted that Lee had “continued to destroy county prand
operty” avoided work assignments. The warning also
noted that employees had expressed “concern for their
safety working around” Lee as well as their “concern
for the safety of the traveling public when [he is
] operating heavy equipment on the highway.” The warning
concluded that Lee continued to “exhibit a poor atlack
titude, of respect for county property, low morale
, poor job performance, and little or no initiative
or desire to perform the task at hand.” The warning
demanded that Lee improve in these areas or otherwise
face possible termination.
Shortly after this warning, the county issued Lee a
notice of termination with the understanding that he
could return to work if he successfully completed an
alcohol treatment program. Lee successfully completed
the program.
Later in 1995, Lee hit an overhead electrical wire
with a county truck, tearing away one end of the wire
from a nearby house. The incident caused damage to
the house, and a resulting power surge damaged several
household electrical appliances. Apparently, the county
issued Lee no warning following this incident. Lee
received no warnings between the January 25, 1995 warning
and 1998.
Hyde testified that despite the warnings that Lee received
he—Hyde—saw no effort on Lee’s part to improve his
job performance. According to Hyde, Lee’s typical
response to any comment about his job performance was
“get the union in here.” Hyde further testified that
he saw no concern on Lee’s part about his job performance
nor any effort by Lee to initiate any discussion on
how he could improve.
On April 14, 1998, Lee was spreading rock and gravel
on a slippery road. At the time, he was driving a
county dump truck. He was traveling at the recommended
speed limit of twenty miles per hour when he was forced
to swerve the truck off to the right side of the road
to avoid being hit by an oncoming car. In doing sLee
o, hit and broke an overhead utility wire with the
box of the truck that he had earlier raised to spread
the rock and gravel.
Two days later, Lee, while driving a county dump thit
ruck, and broke a support wire for an overhead utility
line partially hidden by overhanging trees. At the
time, Lee was spreading rock at an intersection in
a wooded area.
Lee immediately reported both incidents to the cou
nty.
On April 21 Hyde met with the county board of supervisors
to discuss the two incidents. Shortly after this Lee
meeting, was notified that the board had decided to
conduct a termination hearing on April 27. Lee attended
the hearing with his union representative.
In lieu of termination, Hyde recommended to the board
a two-week suspension provided Lee would submit to
a physical exam and agree to four drug and alcohol
tests per year. The county would pay for one test
and Lee would be responsible for the other three.
(The union contract provided for only one annual
drug test.) Several days later, Lee rejected the
offer. Lee testified he rejected the offer because
he did not want to pay for three drug and alcohol tests
per year.
Thereafter, the county issued Lee a written notice
of termination on May 4, 1998. The notice explained
that the decision to terminate Lee’s employment was
“based on Section 4.02 of the current contract which
addresses the history of similar and/or past offenand
ses, Section 4.03(D) gross negligence resulting in
willful destruction of property.”
Shortly thereafter, Lee applied for unemployment insurance
benefits. On May 19, 1998, the Iowa Workforce Development
Center determined that Lee was eligible for benefiThe
ts. decision determined that the “employer did not
furnish sufficient evidence to show misconduct.” The
county, as intervenor, appealed the decision.
On June 9 an Administrative Law Judge (ALJ) held a
hearing at which Lee and Hyde testified. On June
18, in a written decision, the ALJ reversed the earlier
decision that had allowed benefits. The ALJ found
that the county had established misconduct on the
part of Lee. The decision resulted in a disqualification
for benefits.
Lee appealed to the Employment Appeal Board, which
affirmed the ALJ’s decision. Lee petitioned for judicial
review in the district court. The district court concluding
reversed, that “the Employment Appeal Board erred as
a matter of law in finding that Lee’s conduct was misconduct
for which he could be denied benefits.”
II. Scope of Review.
The Iowa Administrative Procedure Act, Iowa Code cgoverns
h. 17A, our review of unemployment benefits cases.
See Dico, Inc. v. Iowa Employment Appeal Bd.,576
N.W.2d 352, 354 (Iowa 1998). When engaging in judicial
review under Iowa Code section 17A.19(8) (1999), a
district court acts in an appellate capacity to correct
errors of law on the part of an agency. Holland BBoard
ros. Constr. v. of Tax Review, 611 N.W.2d 495, 499
(Iowa 2000).
When this court reviews a district court’s judicial
review decision, we apply the standards of section
17A.19(8) to the agency action to determine whether
our conclusions are the same as those of the district
court. Here, the issue concerns whether there was
substantial evidence to support the agency’s determination
of misconduct. Therefore, the standard we apply is
whether the agency’s decision is supported by substantial
evidence in the record made before the agency when
that record is viewed as a whole. See Iowa Code
§ 17A.19(8)(f).
We are bound by agency findings of fact that are supported
by substantial evidence. Norland v. Iowa Dep’t of
Job Serv.,412 N.W.2d 904, 913 (Iowa 1987). Evidence
is substantial when a reasonable mind could accept
it as adequate to reach the same finding. Id.
III. Did Substantial Evidence Support the Agency’s
Decision That Lee’s Actions Constituted Misconduct
?
A. The law regarding misconduct. Iowa Code section
96.5(2) (1997) provides that a claimant is disqualified
from unemployment benefits if the department of workforce
development finds that the claimant has been discharged
for misconduct in connection with the individual’s
employment. The Iowa Administrative Code defines
misconduct
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
[is] 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 carelessness or negligence of such
degree of recurrence as to manifest equal culpabilwrongful
ity, 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. On the other hand mere inefficiency, unsatisfactory
conduct, failure in good performance as the result
of inability or incapacity, inadvertencies or ordinary
negligence in isolated instances, or good faith errors
in judgment or discretion are not to be deemed misconduct
within the meaning of the statute.
Iowa Admin. Code r. 871—24.32(1)(a) (1997). We have
previously noted that this definition “accurately reflects
the intent of the legislature.” Reigelsberger v. Employment
Appeal Bd.,500 N.W.2d 64, 66 (Iowa 1993).
The employer bears the burden of proving
a claimant is disqualified for benefits because of
misconduct. Id.; see Iowa Code § 96.6(2) (“The employer
has the burden of proving that the claimant is disqualified
for benefits pursuant to section 96.5.”).
“‘Misconduct must be substantial in order
to justify a denial of unemployment benefits. Misconduct
serious enough to warrant the discharge of an employee
is not necessarily serious enough to warrant a denial
of benefits.’” Reigelsberger, 500 N.W.2d at 66 (quoting
Breithaupt v. Employment Appeal Bd.,453 N.W.2d 532
, 535 (Iowa App. 1990)).
Determining whether an employee has committed
misconduct is circumscribed by the provisions of Iowa
Administrative Code rule 871—24.32(8). The rule provides
that
[w]hile past acts and warnings can be used to determine
the magnitude of a current act of misconduct, a discharge
for misconduct cannot be based on such past act or
acts. The termination of employment must be based
on a current act.
Iowa Admin. Code r. 871—24.32(8). Therefore, “[a]
termination for misconduct will not justify a denial
of unemployment compensation if the termination is
based solely on past acts.” Ringland Johnson, In585
c. v. Hunecke,N.W.2d 269, 271 (Iowa 1998).
The definition of “misconduct” in the administrative
code focuses on whether the employee’s conduct was
deliberate, intentional, or culpable. Kelly v. Iowa
Dep’t of Job Serv.,386 N.W.2d 552, 554 (Iowa App. see
1986); also Savage v. Employment Appeal Bd., 529 N
.W.2d 640, 642 (Iowa App. 1995) (noting that misconduct
is a deliberate act or omission which requires a showing
of a deliberate intention or culpable act by the eRoberts
mployee); v. Iowa Dep’t of Job Serv.,356 N.W.2d 21222
8, (Iowa App. 1984) (noting that misconduct connotes
volition). Therefore, whether misconduct has occurred
requires proof that the employee acted intentionala
ly; showing of mere negligence is not enough to constitute
misconduct.
B. Analysis.
1. Negligent acts. The agency first found that Lee
was negligent in the performance of his job duties
. In support of this finding, the agency noted that
there was (1) no other explanation “for having two
accidents of the same type within a three-day perand
iod” (2) no evidence that “Lee was somehow physically
or mentally incapable of performing his job duties
in a safe and prudent manner.” Based on this evithe
dence, agency jumped to the conclusion that Lee “simply
did not care to give enough attention and caution to
his responsibilities to perform them well and safeThis
ly.” leap in reasoning—in the agency’s view—satisfied
the intentional requirement for misconduct.
There seems to be no dispute that the two accidents
in April 1998 precipitated Lee’s employment terminthere
ation. However, is no record evidence that Lee intentionally
or deliberately damaged the utility lines. We conclude
as a matter of law that these accidents standing alone
do not constitute misconduct.
Of course, the definition of misconduct recognizes
that multiple negligent acts may amount to miscon
duct:
Misconduct . . . is . . . limited to conduct evincing
such willful or wanton disregard of an employer’s interest
as is found in . . . carelessness or negligence of
such degree of recurrence as to manifest equal cuwrongful
lpability, 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.
Iowa Admin. Code r. 871—24.32(1)(a) (emphasis adde
d).
We hold, however, as a matter of law, that under the
facts here the property damage in 1991 and three accidents
involving electrical wires (two in April 1998 and the
one in 1995), even when taken together, do not amount
to misconduct. There is no explanation in the record
as to the property damage in 1991. The agency therefore
made no finding of negligence as to this incident.
The accident in 1995 happened when Lee’s dump truck
came into contact with an overhead electrical wire
. The agency also made no finding that this accident
happened because of Lee’s negligence. Instead, the
agency focused on the two accidents in 1998 and concluded
that these accidents happened because Lee was negl
igent.
One of the 1998 accidents happened when Lee swerved
his truck off the road to avoid hitting an oncoming
car, and the other happened when Lee hit a power line
partially obstructed from view by overhanging tree
limbs. The only finding that the agency made to support
its conclusion that Lee was negligent was that two
accidents of the same nature happened within a thday
ree-period. So, the agency concluded Lee must have
been negligent. The fact that two accidents of the
same nature happened within a three-day period is speculative
at best on the question of negligence.
There is no evidence other than Lee’s testimony as
to how these accidents happened. Under his testiwe
mony, find, as a matter of law, no negligence. There
was no evidence that Lee violated any traffic laws
. Additionally, the uncontroverted evidence is that
the two accidents were beyond Lee’s control. In fs
act, Lee’action in swerving to miss an oncoming car
demonstrates he had his employer’s best interests in
mind because his evasive action avoided a potentially
serious accident and monetary loss for the employeIn
r. short, there was nothing about these two accidents
that would support an inference that Lee “did not care
to give enough attention and caution to his responsibilities
to perform them well and safely.”
We conclude the evidence falls short of establishing
“carelessness 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 interest or of the emps
loyee’duties and obligations to the employer.”
2. Failure to improve job performance. Additionalthe
ly, agency found that Lee failed to perform his job
to the best level of his ability. This failure, the
agency concluded, constituted misconduct. On this
point, the agency expressly found as follows:
The claimant was certainly aware the employer expected
a certain standard of performance from him as evidenced
from his performance evaluations and the previous incident
of possible termination in 1995. For whatever reathe
son, claimant refused to improve his performance by
exercising more caution . . . . Failure to perform
a job to the best level of one’s ability is misconSee
duct. Sellers v. Employment Appeal Bd., 531 N.W.2d
645 (Iowa App. 1995).
The agency’s reliance on Sellers to support its finding
of misconduct is misplaced. In Sellers, the claimant
was a house painter who was discharged by his employer
after thirteen months of employment. Sellers, 531
N.W.2d at 645-46. Over this thirteen-month periothe
d, claimant had a history of working slower than he
was capable of doing. Id. at 647. Each time the claimant
received a verbal reprimand from his supervisor, the
claimant’s work performance would improve. Id. Heach
owever, improvement was shortly followed by a decline
in work performance. Id. On the day of his dischthe
arge, claimant applied only one-fourth the amount of
paint that should have been applied by an average painter
in a workday. Id. at 646, 647. This evidence supported
a finding that the claimant did not work as fully and
completely as he was capable of doing.
The court of appeals concluded there was substantial
evidence to support the agency’s finding of miscon531
duct. Sellers, N.W.2d at 647. Underlying this conclusion
was that claimant’s failure to perform was so severe
that it was objectively measurable (performing one
-fourth of the expected work). The permissible inference
was therefore that the claimant intentionally disregarded
his duty to his employer. The improvement in his work
performance after each warning amply demonstrated that
the claimant was capable of doing better. Id. On
the day of his discharge, the claimant had no believable
explanation for his poor performance.
Kelly v. Iowa Department of Job Service,386 N.W.2d
552 (Iowa 1986),stands in stark contrast to SelleIn
rs. Kelly,the claimant, a school custodian, was discharged
for “neglect of his work.” Id. at 553. The triggering
event was the claimant’s failure to adequately clean
the school stage. Id. The claimant had been placed
on probation twice for poor job performance and had
been warned orally and in writing about his job performance
on other occasions. Id. He was also warned that,
if his performance did not improve, he could be tThe
erminated. Id. claimant’s employer testified that
the claimant was capable of doing a good job of cleaning
but did not do it. When asked why he thought the s
claimant’failure to do a good job was intentional,
the employer testified: “Well, I don’t know what
other reason there would be, because he was capable
of doing it.” Id. The agency concluded that the claimant
“was discharged from his position due to poor job performance
and [the claimant] had the ability and capability of
doing the work in question, thus, [claimant’s] actions
indicate a willful and deliberate act on his part so
as to constitute misconduct within the meaning of Iowa
law.” Id. at 553.
The court of appeals reversed, concluding there was
no substantial evidence to support the agency’s finding
of misconduct. Id. at 555. In reversing, the court
noted that
[t]here was no evidence presented of any statements
or actions by [the claimant] which demonstrated a wrongful
intent on his part. The record discloses only that
[the claimant] was apparently incapable of performing
his custodial work to meet the standards required by
his employer.
Id.
The court of appeals further noted that the agency
accepted as substantive proof the subjective conclusion
of the employer that because the claimant “was a capable
worker he must be guilty of misconduct when he failed
to perform to [the employer’s] satisfaction.” Id.
According to the court, accepting the employer’s
subjective conclusion as substantial proof “would
eviscerate the employment security act.” Id. Mothe
reover, court pointed out, “[e]very employer could
defeat an unemployment claim by merely testifying
that an employee was capable, didn’t do the job to
the employer’s satisfaction, and was therefore guilty
of misconduct.” Id.
Significantly, the court further concluded:
The employer’s subjective judgment is proof of dissatisfaction
but, without more, is not proof of misconduct. It
is for the fact finder to determine if the quantum
of evidence adds up to a proof of misconduct. The
hearing officer should not accept as a given that
an employer’s subjective standards set the measure
of proof necessary to establish misconduct. To do
so skews the procedure, forcing the employee to prove
that he is not capable or that he had no intent to
commit misconduct. The result of the hearing offs
icer’analysis is that the burden of proving misconduct
is removed from the employer and shifted to the emcontrary
ployee, to law.
Id.; accord Miller v. Employment Appeal Bd.,423 N.2d
W.211, 214 (Iowa App. 1988) (holding that employer
’s judgment that employee’s poor work performance constituted
misconduct, based on ground that employee was aware
of his job expectations and required level of perfbut
ormance, did not live up to that standard for a thweek
ree-period, was not evidence supporting finding that
employee’s poor work performance constituted “misc
onduct”).
We think Kelly and Miller,rather than Sellers,dictate
the result here. The employer testified that Lee had
annual job evaluations. The employer further testified
that, despite written warnings and the annual job the
evaluations, employer never saw any effort on the part
of Lee to improve his job performance. Based on this
testimony, the agency concluded that Lee was aware
“the employer expected a certain standard of perfbut
ormance,” “[f]or whatever reason, [Lee] refused to
improve his performance.” The agency then concluded
that “[f]ailure to perform a job to the best level
of one’s ability is misconduct.”
As in Kelly and Miller,theagency here simply accepted
the employer’s subjective proof that Lee’s failure
to live up to the employer’s expectation was inteThe
ntional. undisputed testimony in this case is that
Lee never improved his performance, even after receiving
warnings. Therefore, there is no quantifiable or objective
evidence that shows Lee was capable of performing at
a level better than that at which he usually workeThe
d. employer had the burden to provide this objective
evidence. The burden was not on Lee to show he was
not capable of working to his employer’s satisfactAlthough
ion. Lee’s conduct might have been unsatisfactory
as far as the employer was concerned, such conduct
does not amount to misconduct. The last part of the
definition of misconduct makes clear that “mere inunsatisfactory
efficiency, conduct, failure in good performance as
the result of inability or incapacity . . . are not
to be deemed misconduct.” Iowa Admin. Code r. 871
—24.32(1)(a) (emphasis added).
In sum, contrary to the conclusion reached by the the
agency, mere fact that Lee’s performance did not improve
is not evidence of an intent not to improve. Such
a conclusion can only be drawn if there is first established
objective proof that the claimant was actually capable
of improved performance. Because there was no such
evidence here, substantial evidence of misconduct was
lacking.
3. Refusal to accept suspension and undergo drug and
alcohol testing. Additionally, on the issue of Les
e’failure to improve his work performance, the agency
found that Lee
could have shown good faith in an attempt to improve
by accepting the two-week suspension and the attendant
agreement for drug and alcohol testing. His decision
not to make this good faith effort is further evidence
of the fact he simply did not have sufficient interest
in his job to do it well.
We conclude the agency should not have relied on this
evidence because Lee was not discharged because he
refused to accept a two-week suspension and undergo
drug testing four times a year. As the record clearly
shows, the employer’s reason for discharging Lee was
the “history of similar and/or past offenses” under
section 4.02 of the union contract and “gross negligence
in willful destruction of property” under section 03
4.of that contract. Lee’s refusal occurred after the
last incident that gave rise to the employer’s decision
to discharge him. Therefore, Lee’s refusal had nothing
to do with the reason the county discharged him. The
employer cannot now rely on such refusal as additional
proof of misconduct.
IV. Disposition.
The district court correctly concluded that the employer
had not proved misconduct on the part of Lee. The
court of appeals erred in concluding otherwise. We
therefore vacate the court of appeals decision. We
affirm the district court decision (1) reversing the
agency decision and (2) ordering the reimbursement
of Lee’s unemployment benefits.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT AFFIRMED.
All justices concur except Neuman, J., who takes no
part.