RENDERED: June 6, 1997; 10:00 a.m.
NOT TO BE PUBLISHED
NO. 95-CA-3117-MR KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION APPELLANT
APPEAL FROM GRAVES CIRCUIT COURT V. HONORABLE JOHN T. DAUGHADAY, JUDGE
ACTION NO. 94-CI-0093
CHARLES MCALPIN, BOBBY J. DREW, RICHARD P. HENLEY, and IRA E. CLARK DETECTIVE AGENCY APPELLEES
OPINION AFFIRMING
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BEFORE: ABRAMSON, COMBS, and GUIDUGLI, Judges. COMBS, JUDGE. The Kentucky Unemployment Insurance Commission (KUIC) appeals from the decision of the Graves Circuit Court, which had reversed the order of the KUIC denying the appellees unemployment benefits. KUIC argues on appeal that its order was supported by substantial evidence and, therefore, that it was binding upon the reviewing court. As we disagree with the
appellant's contention, we affirm the judgment of the circuit court.
At the time that this cause of action arose, all three appellees were employed by the Ira E. Clark Detective Agency (the Clark Agency). Appellees Bobby J. Drew and Richard Henley were security guards for the Ingersoll-Rand plant in Mayfield, Kentucky; appellee Charles McAlpin was post supervisor of security at the same plant. Prior to having been employed by the Clark Agency, all three had worked in security for Ingersoll-Rand for a varied number of years. When the Clark Agency was employed by Ingersoll-Rand to assume control of plant security in March of 1992, the three appellees became employees of Clark at the same Ingersoll Facility until their termination by Clark on June 15, 1993.
On June 15, 1993, the appellees were confronted by a representative of the Clark Agency with the allegation that they had falsified their time sheets. The appellees were given the choice to resign or to be discharged for falsification of time sheets; they chose to resign -- all the while maintaining that they were not guilty of any wrong doing.
The charges that the appellees had falsified their time sheets arose from a long-standing practice of shift "swapping" among the security personnel that had pre-dated the Clark Agency. When the Clark Agency took over security at the plant, this practice of "swapping" shifts continued with the approval of Bud Poat, an employee of Ingersoll-Rand, who acted as the primary contact person between Ingersoll-Rand and the Clark Agency. As
they were discouraged from working overtime, the security personnel at Ingersoll-Rand would "swap" shifts. For example, an employee would cover a co-worker's Monday and Tuesday shift; in return, the co-worker would work two of the employee's shifts the next week. However, both employees would fill out their time sheets as if they had each worked their own scheduled shifts. Employees would also pay each other personally for shifts actually worked. Thus an employee's time sheet did not always accurately reflect the actual shifts that the employee had worked. In addition to these time sheets, the security guards were required to complete daily security reports. These reports correctly stated the reality of which guard had worked a particular shift. The confusing discrepancy between the time sheets and the daily security reports was discovered by an independent investigator hired by the Clark Agency to investigate thefts at the plant. Upon learning of the discrepancy, the Clark Agency charged appellees with falsification of time sheets and forced their resignation. On June 20, 1993, five days after their terminations, the appellees filed separate claims for unemployment benefits. Their claims were denied on the grounds that they were discharged for misconduct -- specifically for falsification of time sheets. The appellees separately appealed the denial of benefits to an unemployment insurance referee. After conducting an evidentiary hearing on the matter, the referee determined that the appellees had indeed been discharged for misconduct and that they were,
therefore, disqualified from receiving unemployment benefits. Each of the appellees filed an appeal from the referee's decision with the KUIC. The KUIC adopted the referee's findings and affirmed the referee's decision as to each of the appellees.
The appellees jointly appealed the KUIC's decision to the Graves Circuit Court. Finding that the KUIC's order was not supported by substantial evidence, the court reversed the KUIC's decision denying the appellees unemployment benefits. KUIC now appeals from the circuit court's judgment.
The KUIC argues on appeal that a reviewing court must uphold an administrative agency's decision if that decision is supported by substantial evidence. It also contends that its order denying the appellees unemployment benefits was supported by substantial evidence and that the court had no basis for reversing its order.
KRS 341.370(1)(b) disqualifies a claimant from receiving unemployment benefits if he or she has been discharged for misconduct. Misconduct is defined in KRS 341.370(6) as follows:
"Discharge for misconduct" as used in this section shall include, but not be limited to, separation initiated by an employer for falsification of an employment application to obtain employment through subterfuge; knowing violation of a reasonable and uniformly enforced rule of an employer; unsatisfactory attendance if the worker cannot show good cause for absences or tardiness; damaging the employer's property through gross negligence; refusing to obey reasonable instructions; reporting to work under the influence of alcohol or drugs or consuming alcohol or drugs on employer's premises during working
hours; conduct endangering safety of self or co-workers; and incarceration in jail following conviction of a misdemeanor or felony by a court of competent jurisdiction, which results in missing at least five (5) days work.
Misconduct has been further defined as "an act of wanton or wilful disregard of the employer's interest, a deliberate violation of the employer's rules . . ." Unemployment Insurance Commission v. Dye, Ky. App., 731 S.W.2d 826, 828 (1987) (quoting 76 Am.Jur.2d Unemployment Compensation $ 53 (1975)).
An employer bears the burden of proving employee misconduct. Shamrock Coal Company, Inc. v. Taylor, Ky. App., 697 S.W.2d 952 (1985). In cases involving the issue of misconduct, the facts of each case must be examined in light of the reasonable employment relationship. Douthitt v. Kentucky Unemployment Insurance Commission, Ky. App., 676 S.W.2d 472 (1984).
In the case sub judice, appellees Drew and Henley testified that in order to avoid overtime, they were instructed to continue the practice of shift "swapping". McAlpin testified that in order to avoid overtime compensation, Bud Poat directed him to continue to have the guards trade shifts as they had in the past. All three of the appellees testified that although he was employee of Ingersoll-Rand, Poat made all the decisions concerning the security personnel at the plant and that he was the person actually in charge of the day-to-day operations of the security personnel.
The only evidence the Clark Agency offered to dispute the appellees' testimony was a letter addressed to McAlpin from Richard Curby, the president of Clark Agency, dated September 10, 1992, which stated:
It has come to our attention that in the past security personnel at Ingersoll-Rand have paid other Security Officers to work in their place and paid them out of their pocket. This practice constitutes falsification of payroll records which is a federal offense and falsification of our company records, a dischargeable offense. Please advise all security personnel that this practice will not be tolerated. Security Officers caught engaging in this practice in the future will be discharged for misconduct and could face prosecution.
McAlpin acknowledged receiving the letter and posting it for the security guards to read. However, he also stated that he asked Mr. Poat how to handle shift changes between the guards so as to avoid overtime compensation in light of Mr. Curby's letter. McAlpin testified that Mr. Poat instructed that the security guards were to continue to trade shifts as they had before but that the guards were no longer to pay each other for covering shifts. Drew and Henley stated that the practice of paying fellow guards to cover shifts stopped after Mr. Curby's letter and that they did not understand the letter to prohibit shift "swapping".
In determining whether an agency's action was arbitrary, the reviewing court must look at three factors: (1) whether the agency acted within the constraints of its statutory powers; (2) whether a party affected by the agency's order was
afforded procedural due process; and (3) whether the agency's action was supported by substantial evidence. If any one of these three elements is not met, the reviewing court may find the agency's action to have been arbitrary. Commission Transportation Cabinet v. Cornell, Ky. App., 796 S.W.2d 591 (1990).
Examining the facts of the case sub judice in light of the reasonable employment relationship, we find that the undisputed evidence shows that the appellees' conduct did not rise to the level of wanton or wilful disregard of the employer's interest or deliberate violation of the employer's rules. The Clark Agency failed to meet its burden of establishing deliberate misconduct on the part of the appellees. The employees appeared to have done their best to try to ascertain what practice or procedure to follow. The confusion flowing from mixed messages of the Clark Agency and Bud Poat cannot be reasonably characterized as misconduct on the part of these employees. We agree that KUIC has failed the substantial evidence test in denying these appellees their claims for unemployment benefits.
For the foregoing reasons, we affirm the judgment of the Graves Circuit Court reversing the KUIC's order.
ALL CONCUR.
BRIEFS FOR APPELLANT: Randall K. Justice Frankfort, KY
BRIEF FOR APPELLEES: Barbara E. Brundage Paducah, KY