REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1310
September Term, 1997
DEPARTMENT OF LABOR, LICENSING
AND REGULATION
v.
TAMMY L. MUDDIMAN
Wenner,
Davis,
Byrnes,
JJ.
Opinion by Davis, J.
Filed: April 7, 1998 The Department of Labor, Licensing and Regulation (DLLR)
appeals from the judgment of the Circuit Court for Harford County
reversing the decision of the Board of Appeals (Board) of the DLLR.
The Board's decision disqualified appellee Tammy L. Muddiman from
receipt of unemployment insurance benefits based on its
determination that appellee was discharged from employment for
gross misconduct, as defined by Md. Code (1991 Repl. Vol. & 1997
Cum. Supp.), Labor & Employment (L.E.) 8-1002.
Appellee worked for American Studios, Inc. (employer) as a
portrait studio manager. After several warnings, she was
terminated for repeated violations of the employer's policies. In
June 1996, appellee applied for unemployment compensation benefits.
A DLLR claims specialist found that she had been discharged for
violation of her employer's policy, but found insufficient evidence
of misconduct. The employer appealed the findings of the claims
specialist. A hearing was held on July 17, 1996; appellee failed
to appear. The hearing examiner reversed the finding of the claims
specialist, concluding that appellee had been discharged for gross
misconduct as defined in L.E. 8-1002(a)(1)(ii) "repeated
violations of employment rules that prove a regular and wanton
disregard of the employee's obligations." Appellee appealed to the
Board. Upon review of the record, the Board also concluded that
appellee had been discharged for gross misconduct, pursuant to L.E.
8-1002(a)(1)(ii), and affirmed the decision of the hearing
examiner.
Appellee appealed to the Circuit Court for Harford County,
which reversed the decision of the Board, based on a finding that
appellee had engaged in simple misconduct rather than gross
misconduct. In its memorandum opinion, the court concluded that
the Board erred as a matter of law in finding gross misconduct
because "there ha[d] not been a showing that [appellee's] actions
were done with a gross indifference to the interests of the
employer as required by the statute" the standard of gross
misconduct as defined in L.E. 8-1002(a)(1)(i). The Board moved
the lower court to alter or amend its judgment in consideration of
8-1002(a)(1)(ii), under which appellee was disqualified. In its
motion, the Board noted that the standard relied on by the trial
court "gross indifference to the interests of the employer" is
a requirement only of L.E. 8-1002(a)(1)(i), and the case law
relied on by the lower court addressed only that subsection. The
circuit court denied the motion to alter or amend and wrote a
letter, dated July 10, 1997, to counsel explaining:
I agree with you that the cases cited by me in
my Opinion do in fact address a different
section of the Labor and Employment Article.
Specifically, the cases seem to address
Section 8-1002(a)(1)(i) and not Section 8-
1002(a)(1)(ii). Both of these sections,
however, involve gross misconduct and since
there are no reported cases on subsection
(a)(1)(ii), I believe it is appropriate to use
these cases to reason by analogy in
interpreting that portion of the Code.
The Board appealed to this Court raising, for our review, the
following question which we restate for clarity:
Did the circuit court err in finding that
appellee engaged in simple misconduct rather
than gross misconduct when appellee was
discharged for repeatedly violating the
employer's rules despite warnings of possible
termination?
We shall answer the question in the affirmative and reverse
the judgment of the circuit court.
FACTS
From November 1994 to June 8, 1996, appellee was employed as
a portrait studio manager by American Studios, Inc. The employer
discharged her for repeatedly violating its cash handling policy,
as well as for violating its scheduling policy.
According to the cash handling policy, appellee, as the studio
manager, was required to purchase a money order at the end of each
day with the day's cash receipts. She was directed to place each
day's money order in a cash report envelope. On the outside of
each day's envelope, her instructions were to record the amount of
cash collected and the type of money order purchased. The envelope
and the money orders it contained were to remain in the store until
the end of the week, at which time they were to be mailed to
corporate headquarters.
On December 15, 1995, appellee was issued a written
notice/warning for her failure to purchase money orders with the
studio's cash receipts. This warning was prompted by the
employer's discovery of cash shortages in appellee's reports to the
employer's corporate office. Employer advised appellee that she
"must make sure that all money orders are placed in the cash
envelope daily and kept in the studio." Additionally, she was
warned that another violation of the procedure could result in
additional disciplinary action, including termination.
On January 31, 1996, appellee received another written
notice/warning. This notice stemmed from, among other performance
issues, her failure to follow the employer's policy for altering
employee's work schedules, including her own, without seeking the
required authorization from the district manager. In this
"counseling statement" she was warned that "[f]ailure to comply
w[ith] any American Studios policies could result in demotion and
[/]or termination."
On June 1, 1996, appellee's district manager visited her store
and found that appellee had failed to purchase a money order with
the cash received on May 11, 1996, thereby violating the cash
handling policy again. Appellee claimed that she had purchased the
money order and mailed it separately from the cash report.
Notwithstanding this defense, she admitted that she had not
purchased the money order until May 13, 1996, a violation of the
policy requiring that a money order be purchased at the close of
business each day. The employer never received a money order for
the cash receipts of May 11, 1996. Appellee could not produce a
receipt for the money order. She did not record the amount of the
receipts on the envelope as required by her employer's policy. The
employer issued another warning to appellee for failure to abide by
the cash handling policy and she was again warned that further
policy violations could result in termination.
On June 3, 1996, appellee was again responsible for purchasing
a money order. When a representative of the employer visited the
studio on June 8, 1996, however, the representative discovered that
there were cash receipts of $62.68 for June 3, but there was no
money order in the cash report envelope and no record that a money
order had been purchased that day. In response to questioning,
appellee claimed that she had purchased a money order but failed to
put it in the envelope as required. Instead, she explained that
she took it home. Based on this violation and the previous policy
infractions, the employer discharged appellee on June 8, 1996.
DISCUSSION
Standard of Review
This is an appeal of the lower court's judicial review of an
administrative determination. When exercising such judicial
review, a circuit court may:
(1) remand the case for further proceedings;
(2) affirm the final decision; or
(3) reverse or modify the decision if any
substantial right of the petitioner may
have been prejudiced because a finding,
conclusion, or decision:
(i) is unconstitutional;
(ii) exceeds the statutory authority or
jurisdiction of the final decision
maker;
(iii)results from an unlawful procedure;
(iv) is affected by any other error of
law;
(v) is unsupported by competent,
material, and substantial evidence
in light of the entire record as
submitted; or
(vi) is arbitrary or capricious.
Md. Code (1995 Repl. Vol.), State Gov't (S.G.), 10-222(h). "A
court's role is limited to determining if there is substantial
evidence in the record as a whole to support the agency's findings
and conclusions, and to determine if the administrative decision is
premised upon an erroneous conclusion of law." United Parcel Serv.
Inc. v. People's Counsel, 336 Md. 569, 577 (1994).
Because this is an appeal from a circuit court's review of an
agency's final decision, our role in this appeal "'is precisely the
same as that of the circuit court.'" Dept. of Human Resources v.
Thompson, 103 Md. App. 175, 188 (1995) (quoting Dept. of Health &
Mental Hygiene v. Shrieves, 100 Md. App. 283, 303-04 (1994)).
Accordingly, we have the same recourse given to the circuit court
by S.G. 10-222(h).
A reviewing court may not make its own findings of fact, Board
of County Comm'rs v. Holbrook, 314 Md. 210, 218 (1988), or supply
factual findings that were not made by the agency. Ocean Hideaway
Condo. Ass'n v. Boardwalk Plaza, 68 Md. App. 650, 662 (1986).
Findings of fact made by the agency are essential in order for the
reviewing court meaningfully to review the agency's decision. See
Gray v. Anne Arundel Co., 73 Md. App. 301, 307-09 (1987).
Moreover, it is the agency's function to determine the inferences
to be drawn from the facts. On review, neither the circuit court
nor this Court may substitute its judgment for that of the agency.
Eberle v. Baltimore County, 103 Md. App. 160, 166 (1995).
To the extent that issues on appeal turn on the correctness of
an agency's findings of fact, such findings must be reviewed under
the substantial evidence test. Thompson, 103 Md. App. at 190
(citing State Election Bd. v. Billhimer, 314 Md. 46, 58-59 (1988)).
Substantial evidence is "such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion." Id. at
190-91 (internal quotations omitted). See also Relay Improvement
Ass'n v. Sycamore Realty Co., Inc., 105 Md. App. 701, 714 (1995),
aff'd, 344 Md. 57 (1996) (stating that "substantial evidence means
more than a 'scintilla of evidence,' such that a reasonable person
could come to more than one conclusion."). In other words, the
question on appeal becomes whether a reasoning mind could
reasonably have reached the agency's factual conclusion. Eberle,
103 Md. App. at 166. We may not uphold the agency's decision
"'unless it is sustainable on the agency's findings and for the
reasons stated by the agency.'" United Parcel Serv., Inc., 336 Md.
at 577 (quoting United Steelworkers v. Bethlehem Steel, 298 Md.
665, 679 (1984)).
In contrast to factual challenges, when the question before
the agency involves one of statutory interpretation or an issue of
law, our review is more expansive. Liberty Nursing Center, Inc. v.
Dept. of Health & Mental Hygiene, 330 Md. 433, 443 (1993). Under
this more expansive review, we may substitute our judgment for that
of the agency. Thompson, 103 Md. App. at 190. This standard of
review is aptly named the "substituted judgment standard." Id.
Consequently, we are not bound by the agency's statutory or legal
conclusions. Id.; Dep't. of Health & Mental Hygiene v. Reeders
Memorial Home, Inc., 86 Md. App. 447, 452 (1991).
Lastly, "modification or reversal of the agency's decision is
only appropriate when the petitioner has demonstrated that
substantial rights of the petitioner have been prejudiced by one or
more of the causes specified in [S.G.] 10-222(h)." Thompson, 103
Md. App. at 191 (citing Bernstein v. Real Estate Comm'n, 221 Md.
221, 230 (1959), appeal dismissed, 363 U.S. 419, 80 S.Ct. 1257,
4 L.Ed.2d 1515 (1960)).
Accordingly, we must examine the record to determine whether
the Board applied the correct law and whether there was substantial
evidence from which a reasonable mind could arrive at the factual
conclusions reached at the administrative level.
A claimant for unemployment benefits can be disqualified from
receipt of those benefits if the claimant was terminated for "gross
misconduct." Hider, slip op. at 11-12. The applicable statute is
L.E. 8-1002, which reads in pertinent part:
8-1002. Gross misconduct.
(a) "Gross misconduct" defined. In
this section "gross misconduct":
(1)means conduct of an employee
that is:
(i)deliberate and willful
disregard of standards of behavior
that an employing unit rightfully
expects and that shows gross
indifference to the interests of the
employing unit; or
(ii)repeated violations of
employment rules that prove a
regular and wanton disregard of the
employee's obligations; and
(2)does not include:
(i)aggravated misconduct, as defined
under 8-1002.1 of this subtitle; or
(ii)other misconduct, as defined under
8-1003 of this subtitle.
(b) Grounds for disqualification. An
individual who otherwise is eligible to
receive benefits is disqualified from
receiving benefits if unemployment results
from discharge or suspension as a disciplinary
measure for behavior that the Secretary finds
is gross misconduct in connection with
employment.
The Board disqualified appellee under L.E. 8-1002(a)(1)(ii).
Examining the record, we find substantial evidence to support the
Board's factual findings, and there was no legal error. The
employer testified regarding appellee's policy violations and
presented four counseling statements that had been issued to her as
a result of these violations. Each counseling statement reminded
appellee of her obligations, and of the possibility of discharge
should she continue to violate the policy. Despite these warnings,
appellee continued to violate the relevant policies.
The documentation and testimony offered by the employer
provide substantial evidence for the Board's factual findings as to
appellee's violations. Additionally, those factual findings
support the Board's legal conclusion that appellee was discharged
for "repeated violations of employment rules that prove a regular
and wanton[] disregard of the employee's obligations." L.E. 8-
1002(a)(1)(ii).
The circuit court erred in reversing the Board's determination
and subsequently finding simple misconduct because it misconstrued
the applicable statute. The lower court analyzed the case under
L.E. 8-1002(a)(1)(i), while appellee was disqualified under L.E.
8-1002(a)(1)(ii). These two subsections set forth separate
definitions of gross misconduct that require different levels of
intent. Additionally, subsection (i) may be implicated by a single
violation, while subsection (ii) requires repeated violations.
This case involves repeated violations of employment rules.
In support of its reversal, the lower court cited four cases,
each of which addresses subsection (i), not subsection (ii). The
court concluded that there had been no showing that appellee acted
with "gross indifference to the interests of the employer as is
required by the statute." As stated supra, the trial court
confirmed, in its response to the motion to alter or amend, that it
referred only to subsection (i) and cases that construe it as
opposed to subsection (ii). Nevertheless, the lower court reasoned
that, because it found no case law on subsection (ii), it could
apply cases dealing with subsection (i) by analogy since both
subsections define categories of gross misconduct. The lower
court's reasoning is essentially flawed.
A showing of "gross indifference" is an express requirement
only of the first subsection of the statute. It has no bearing on
whether there is substantial evidence of gross misconduct under the
second subsection, which is based on "repeated" violations.
Indeed, the legislature included a different level of intent for
repeated violations. Specifically, to violate subsection (ii), the
repeated violations must prove a "regular and wanton disregard" to
obligations while subsection (i) requires a "deliberate and willful
disregard" that shows "gross indifference."
Furthermore, even if appellee had been terminated, pursuant to
subsection (i), we are not persuaded that her actions did not rise
to the level of gross misconduct analyzed by the trial court. We
note that the trial court did not cite Department of Economic &
Emp. Dev. v. Propper, 108 Md. App. 595 (1996), a case that
addressed whether an employee was discharged for gross misconduct
under subsection (i). In Propper, this Court held that, if an
employee deliberately and knowingly ignores his or her employer's
requirement that he or she arrive or leave at a certain time, such
behavior could evidence a gross indifference to the employer's
interests and a defiance of standards that the employer has a right
to expect to be followed. Id. at 611. We held further that this
is particularly true if the employee continues this conduct in the
face of a warning that such behavior is not acceptable. Id.
There are no hard and fast rules for determining what in the
particular employment context constitutes "deliberate and willful"
misconduct. Id. at 609 (citing Department of Economic and
Employment Development v. Owens, 75 Md. App. 472, 477 (1988)). "In
the context of unemployment insurance benefits, '[t]he "wrongness"
of the conduct must be judged in the particular employment
context.'" Hider, slip op. at 15 (citation omitted). "The
important element to be considered is the nature of the misconduct
and how seriously it effects the claimant's employment or the
employer's rights." Id. (quoting Department of Economic and
Employment Development v. Jones, 79 Md. App. 531, 536 (1989)).
In this case, there was sufficient evidence that appellee
deliberately and willfully decided on more than one occasion not to
purchase money orders for the daily cash receipts. In one
instance, she claims she took the money order home a definite
violation of the policy. At least one of the money orders is still
unaccounted for. Each violation was followed by counseling and a
warning that if the improper acts continued, she might be
discharged. This pattern of deliberate mishandling of her
employer's revenues constitutes a gross indifference to the
interests of the employer.
Although we agree with the trial court's reasoning that the
difference between simple misconduct and gross misconduct is the
severity of the employee's actions, we find substantial evidence
in the record to support the Board's finding of gross misconduct as
a matter of law.
JUDGMENT OF THE CIRCUIT COURT
FOR HARFORD COUNTY REVERSED.
COSTS TO BE PAID BY APPELLEE.
Ext refs: Dept. of Labor, etc. v. Muddiman, Op. by Davis, J.