RENDERED: October 30, 1998; 2:00 p.m.

NOT TO BE PUBLISHED

C o m m o n w e a l t h O f K e n t u c k y

C o u r t O f A pp e a l s

NO. 1997-CA-001252-MR

ENGELHARD CORPORATION APPELLANT

APPEAL FROM JEFFERSON CIRCUIT COURT V. HONORABLE STEPHEN K. MERSHON, JUDGE

ACTION NO. 96-CI-6327

FRANCES E. JONES APPELLEE

OPINION REVERSING AND REMANDING

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BEFORE: GUDGEL, Chief Judge; GUIDUGLI and SCHRODER, Judges. GUDGEL, CHIEF JUDGE: This is an appeal from a judgment entered by the Jefferson Circuit Court. The court reversed a decision of the Kentucky Unemployment Insurance Commission (KUIC) which determined that appellee, Frances E. Jones, was ineligible to receive unemployment benefits due to her misconduct. On appeal, appellee's employer, appellant Engelhard Corporation, contends that the circuit court impermissibly substituted its judgment as to factual issues for that of KUIC. We agree. Hence, we reverse and remand.

Appellant manufactures pigments for use in paints and plastic products. Its drug and alcohol abuse policy includes a requirement that any employee who is absent from work for more than thirty days must submit to a physical examination and a drug test before returning to work. Following a medical leave which exceeded thirty days, appellee went to a medical facility for her scheduled physical examination and executed a written consent to both the exam and a drug test. However, appellee then refused to provide a urine sample for use in drug testing on the ground that she was experiencing an excessive menstrual flow. Appellant's human resources manager denied appellee's request that she be permitted to return in three days and provide the necessary urine specimen. Thereupon, appellee provided a urine specimen which was insufficient in amount for drug testing. She was then instructed to consume some liquids. Apparently, appellee did consume a soft drink at lunch, but she claimed that she was not offered additional liquids upon her return to the medical facility after lunch. By contrast, appellant's witness contended that appellee refused the opportunity to consume additional liquids. In any event, appellee failed to provide a satisfactory urine specimen and was suspended from her job. Subsequently, appellee's employment was terminated for misconduct based upon her failure to comply with the requirements of appellant's drug policy.

Thereafter, appellee filed a claim for unemployment benefits. After a hearing, a referee determined that appellee's inability to provide an adequate urine specimen was not within her control, and hence, that she was improperly discharged for misconduct. On appeal KUIC determined that appellant's drug testing policy was reasonable and uniformly enforced and, contrary to the referee's finding, that appellee refused to comply with the policy. Hence, KUIC concluded that appellant had properly discharged her for misconduct. Accordingly, KUIC entered a final order declaring that appellee was ineligible to receive unemployment benefits. On appeal to the circuit court, KUIC's decision was reversed. This appeal followed.

Appellant contends that the circuit court erred by reversing KUIC's final order. We agree.

On appeal of a referee decision, KUIC has the authority to "judge the weight of the evidence and the credibility of witnesses and to disagree with the conclusion reached by the referee." Burch v. Taylor Drug Store, Inc., Ky. App., 965 S.W.2d 830, 834 (1998). In short, KUIC is authorized to make its own findings based upon the evidence in the record even though those findings are inconsistent with those of the referee. However, a court's standard of review of a KUIC decision is limited. The applicable rule is stated in Southern Bell Tel. & Tel. Co. v. Kentucky Unemployment Ins. Comm'n, Ky., 437 S.W.2d 775, 778 (1969), as follows:

Judicial review of an award of the Unemployment Insurance Commission is governed by the general rule applicable to administrative actions. If the findings of fact are supported by substantial evidence of probative value, then they must be accepted as binding and it must then be determined whether or not the administrative agency has applied the correct rule of law to the facts so found.

Thus, although KUIC is authorized to conduct a de novo review of a referee's decision and make its own findings, a circuit court is bound by KUIC's findings if they are supported by substantial evidence. Kosmos Cement Co., Inc. v. Haney, Ky., 698 S.W.2d 819 (1985).

Here, contrary to the applicable rule, the circuit court relied upon the referee's findings of fact and also made independent findings of its own. Clearly, therefore, the circuit did not apply the appropriate standard of review and even more egregiously, substituted its judgment for that of KUIC and made findings of its own. In these respects, the court erred.

The purpose of unemployment benefits is to compensate employees who are unemployed through no fault of their own. Kentucky Unemployment Ins. Comm'n v. Kroehler Mfg. Co., Ky., 352 S.W.2d 212 (1961). Once the claimant proves his or her eligibility for unemployment benefits, the burden then shifts to the employer to defeat recovery on the claim by proving that the employee is disqualified from receiving benefits. Brown Hotel Co. v. Edwards, Ky., 365 S.W.2d 299 (1962). One statutory ground for disqualification is misconduct related to the employee's work. Smith v. Kentucky Unemployment Ins. Comm'n, Ky. App., 906 S.W.2d 362 (1995). The examples of misconduct in KRS 342.370(6) include a "knowing violation of a reasonable and uniformly enforced rule of an employer." Moreover, the employee has the burden of establishing the existence of unavoidable circumstances which may excuse a violation of a rule. Burch, supra.

Here, KUIC found that appellant had adopted a reasonable drug testing policy and that it was uniformly enforced. The circuit court did not address or disagree with these findings. Thus, the only issue on appeal to the circuit court was whether KUIC's finding that appellee violated the drug testing policy without justification was supported by substantial evidence. Based upon our review of the record, it is clear that the finding was amply supported by substantial evidence of probative value. Indeed, appellant adduced evidence that appellee could have produced an adequate urine specimen had she ingested sufficient fluids available to her, yet she made no effort to do so. This is true even though appellee spent almost an entire day the doctor's office. Moreover, there was also medical proof that appellee's menstrual cycle would not preclude her from providing an adequate urine sample, in contrast to appellee's unsupported contention that she was unable to provide a specimen. The foregoing evidence was clearly sufficient to support KUIC's finding that appellee could, but refused to, provide a sufficient urine specimen for testing.

Because substantial evidence was adduced supporting the finding that appellee refused to provide an adequate urine sample for testing even though she could have done so, the court erred by setting aside KUIC's findings in this vein. Hence, the court's order must be reversed.

The circuit court's order is reversed and this cause remanded with directions to enter an amended order consistent with the views expressed in this opinion.

SCHRODER, J., CONCURS. GUIDUGLI, J., CONCURS IN RESULT ONLY. BRIEF FOR APPELLANT: Philip C. Eschels Luann Devine Louisville, KY

Stanford G. Wilson Frederick L. Douglas Atlanta, GA