----ooOoo----
EAGALA, Inc.,
Petitioner,
v.
Department of Workforce
Services, Workforce Appeals
Board; and Gregory W. Kersten,
Respondents.
¶1 Petitioner the Equine Assisted Growth and Learning
Association, Inc. (EAGALA) seeks judicial review of Respondent
Workforce Appeals Board's (the Board's) final order ruling that
EAGALA did not have just cause to terminate Respondent Gregory W.
Kersten. See Utah Code Ann. § 35A-4-405(2)(a) (2005). We
affirm.
BACKGROUND
¶2 Kersten and Lynn Thomas founded EAGALA in 1999 as a
nonprofit corporation promoting equine assisted therapy. Kersten
was the chairman of the company's board of trustees. Kersten and
Thomas both resigned from the board in 2005 because they were
collecting salaries. Kersten then became the company's president
and chief executive officer.
¶3 On November 16, 2005, Kersten was notified that the board of
directors had voted unanimously to terminate his employment.
EAGALA claimed that Kersten misused corporate funds when, among
other things, he charged EAGALA for the repair of his tractor,
for veterinary care of his horses, for payments on his house and
barn, and for renting office space in his home even after most of
EAGALA's offices had moved to a different location. EAGALA also
contended that Kersten verbally abused board members and failed
to comply with the directives of the board by not submitting a
strategic plan for the company.
¶4 After receiving notification that he had been terminated,
Kersten applied for benefits under the Employment Security Act.
The Department of Workforce Services initially denied Kersten's
claim, finding that he was discharged from his job for an act
constituting a crime that he admitted or of which he had been
convicted. Kersten appealed that decision and sought a hearing
before an administrative law judge (ALJ).
¶5 Around 8 a.m. on the morning of the hearing, EAGALA faxed
documentary evidence to the ALJ and emailed copies of the
documents to Kersten. During the 3 p.m. telephonic hearing,
Kersten told the ALJ that he had not checked his email that day
and therefore had not received the documents. The ALJ then
determined that the documents would not be received as evidence.
¶6 After the hearing, the ALJ ruled that EAGALA failed to prove
that it had just cause to terminate Kersten because EAGALA did
not show that Kersten was culpable for his conduct or that he had
knowledge that it was wrong. Therefore, EAGALA was found to be
liable for a share of the unemployment benefit costs paid to
Kersten. EAGALA appealed the ALJ's decision to the Board,
arguing that just cause was demonstrated and that the documentary
evidence should have been admitted. The Board adopted the ALJ's
findings of fact and affirmed the ALJ's decision, concluding that
EAGALA did not unequivocally disallow Kersten's expenditures.
The Board's decision did not make any reference to the excluded
documentary evidence. EAGALA seeks review of the Board's
decision by this court.
ISSUES AND STANDARDS OF REVIEW
¶7 EAGALA first argues that the Board did not "decide[] all of
the issues requiring resolution," Utah Code Ann. § 63-46b-
16(4)(c) (2004), because it failed to rule on the ALJ's decision
to exclude the documentary evidence faxed the morning of the
hearing. Issues raised under Utah Code section 63-46b-16(4)(c)
are questions of law to which we apply a correction of error
standard. See SEMECO Indus., Inc. v. State Tax Comm'n , 849 P.2d
1167, 1171 (Utah 1993).
¶8 EAGALA also challenges the Board's factual findings
supporting its conclusion that EAGALA did not have just cause to
terminate Kersten. See Utah Code Ann. § 63-46b-16(4)(g).
[T]his court grants great deference to an
agency's findings, and will uphold them if
they are supported by substantial evidence
when viewed in light of the whole record
before the court. Substantial evidence has
been defined as such relevant evidence as a
reasonable mind might accept as adequate to
support a conclusion. . . . It is the
petitioner's duty to properly present the
record, by marshaling all of the evidence
supporting the findings and showing that,
despite that evidence and all reasonable
inferences that can be drawn therefrom, the
findings are not supported by substantial
evidence.
¶9 Finally, EAGALA contends that the Board erred when it
concluded that EAGALA did not have just cause to terminate
Kersten. See Utah Code Ann. § 63-46b-16(4)(d). "When we review
an agency's application of the law to a particular set of facts,
we give a degree of deference to the agency." Autoliv ASP, Inc.
v. Department of Workforce Servs., 2001 UT App 198,¶16, 29 P.3d 7
(quotations and citations omitted). Application of the
Employment Security Act "requires little highly specialized or
technical knowledge . . . uniquely within the [Board's]
expertise"; therefore, we grant "moderate deference" to the
Board's decision. Id. (alteration in original) (quotations and
citations omitted). "Thus, we will uphold the [Board's] decision
so long as it is within the realm of reasonableness and
rationality." Id. (alteration in original) (quotations and
citations omitted).
ANALYSIS
I. Exclusion of Documentary Evidence
¶10 EAGALA first argues that the Board erred by failing to
address the ALJ's refusal to admit documentary evidence EAGALA
faxed to the ALJ and emailed to Kersten the morning of the
hearing. According to EAGALA, the Board failed to "decide[] all
of the issues requiring resolution," Utah Code Ann. § 63-46b-
16(4)(c), and instead of excluding the documents, the ALJ should
have followed the relevant administrative rule, which provides:
Parties may introduce relevant documents
into evidence. Parties must mail, fax, or
deliver copies of those documents to the ALJ
assigned to hear the case and all other
interested parties so that the documents are
received prior to the hearing. Failure to
prefile documents may result in a delay of
the proceedings. If a party has good cause
for not submitting the documents prior to the
hearing or if a party does not receive the
documents sent by the Appeals Unit or another
party prior to the hearing, the documents
will be admitted after provisions are made to
insure due process is satisfied. At his or
her discretion, the ALJ can either:
(a) reschedule the hearing to another
time;
(b) allow the parties time to review the
documents at an in-person hearing;
(c) request that the documents be faxed
during the hearing, if possible, or read the
material into the record in case of telephone
hearing; or
(d) leave the record of the hearing
open, send the documents to the party or
parties who did not receive them, and give
the party or parties an opportunity to submit
additional evidence after they are received
and reviewed.
Utah Admin. Code Ann. R994-508-109(11) (2006). Kersten claimed
that he had not checked his email the morning of the hearing and
thus had not received the documents. After learning this, the
ALJ stated that he would not address the documents or admit them
into the record. The ALJ also stated, however, that he would not
"prevent any discussion or verbal testimony regarding anything
that might be contained in those documents."
¶11 Under the plain language of the rule, the proper course
would have been to order one of the enumerated options, such as
rescheduling the hearing, reading the documents into the record,
or resending the documents to Kersten. However, we need not
determine whether the Board erred by failing to address this
issue because, even assuming the documents should have been
admitted, EAGALA was not prejudiced.
¶12 EAGALA asserts that the excluded documents were crucial
because they included checks written by Kersten to pay for both
his horse's veterinary expenses and the construction of his barn.
The documents also included corporate credit card statements
showing charges for vehicle maintenance, fuel, and dry cleaning.
¶13 We disagree that the introduction of these documents was
critical because the ALJ allowed extensive questioning and
discussion on all of the contested expenditures. The ALJ asked
Kersten whether he had a corporate credit card, whether he was
given any instructions on what the card could be used for, and
whether he used the card for his dry cleaning bills. The ALJ
further questioned Kersten about the veterinary bills and the
vehicle costs.
¶14 EAGALA's witnesses were also asked about these expenditures.
Thomas told the ALJ that Kersten "purchased a barn for his
personal property," "used EAGALA funds to support his personal
horses," and "purchased items--tools [and] fencing materials that
benefitted his personal property." EAGALA's counsel specifically
asked Thomas whether Kersten "would . . . make out checks for
personal use." Thus, because these expenditures were repeatedly
discussed, EAGALA was not harmed by the exclusion of the
documents. Cf. State v. Stephens, 667 P.2d 586, 588 (Utah 1983)
("Where evidence is excluded by the trial court, any error which
may have resulted from such exclusion is cured where the
substance of the evidence is later admitted through some other
means.").1
II. The Board's Factual Findings
¶15 EAGALA next contends that the Board's decision is not
supported by substantial evidence. We disagree. Although EAGALA
has marshaled the evidence in support of the Board's decision, it
has not demonstrated "that despite the supporting facts, . . .
the findings are not supported by substantial evidence." Grace
Drilling Co. v. Board of Review of the Indus. Comm'n , 776 P.2d
63, 68 (Utah Ct. App. 1989).
¶16 We review the whole record before the court to determine
whether the Board's findings are supported by substantial
evidence. See Utah Code Ann. § 63-46b-16(g). It is not this
court's place to "substitute its judgment as between two
reasonably conflicting views, even though we may have come to a
different conclusion had the case come before us for de novo
review." Grace Drilling Co., 776 P.2d at 68. Similarly, "[i]t
is the province of the Board, not appellate courts, to resolve
conflicting evidence, and where inconsistent inferences can be
drawn from the same evidence, it is for the Board to draw the
inferences." Id.
¶17 The Board found that because EAGALA did not make a clear
showing that Kersten knew his expenses were improper, EAGALA
failed to show that just cause existed. After reviewing the
record, we conclude that this finding is supported by substantial
evidence. This evidence includes Kersten's testimony that, to
his knowledge, he did not use corporate funds improperly and
believed he was authorized to charge EAGALA for dry cleaning his
uniform; for the maintenance of his vehicle that he used for
company events; and for repair of his tractor that was used for
EAGALA purposes. He further testified that he did not charge
EAGALA for the care of his personal horses. Further, there is no
dispute in the record that Kersten never received a negative job
performance review. And, Kersten stated that none of the Board
members ever complained to him about his expenditures or
behavior.
¶18 The contrary evidence includes the testimony of Thomas and
Amy Blossom, EAGALA board members, that Kersten did not have
permission to use company funds for his dry cleaning, vehicle,
tractor, and veterinary expenses. Thomas also testified that she
confronted Kersten about his continued withdrawal of $1000 per
month for rent even after most of the EAGALA offices had moved
out of Kersten's home. Thomas further testified that Kersten
used corporate money to start a tack and saddle business and to
build a barn, improper expenditures that the Board only
discovered recently. Thomas also testified about incidents where
Kersten verbally abused EAGALA board members.
¶19 Thus, many of the facts surrounding Kersten's expenditures
and termination are disputed, with each side offering its own
version of events. However, as stated, it is not our duty to
resolve these conflicts, see id.; rather, it is the province of
the ALJ to determine which party is more credible where divergent
testimony is given. As noted by the Board in adopting the ALJ's
findings, the ALJ in this case "[wa]s in the unique position of
being an active participant in the hearing, interacting with the
parties and also questioning the witnesses" and, in so doing,
"found that the claimant was credible" because he "was able to
provide an explanation as to why the expenses should have been
paid by the corporation." See Albertsons, Inc. v. Department of
Employment Sec., 854 P.2d 570, 574-75 (Utah Ct. App. 1993)
(noting that testimony of parties diverged as to whether claimant
intentionally damaged forklift, but court was not in position "to
second guess the detailed findings of the ALJ"). We therefore
decline to disturb the ALJ's and Board's factual findings because
they are supported by substantial evidence.
III. The "Just Cause" Determination
¶20 Finally, EAGALA asserts that the Board erroneously concluded
that no just cause existed to terminate Kersten. An employee
will not be awarded unemployment benefits if the Department of
Workforce Services concludes that the employee was discharged for
just cause. See Utah Code Ann. § 35A-4-405(2)(a); see also
Autoliv ASP, Inc. v. Department of Workforce Servs. , 2001 UT App
198,¶17, 29 P.3d 7; Bhatia v. Department of Employment Sec. , 834
P.2d 574, 577 (Utah Ct. App. 1992). "To establish 'just cause,'
three elements must be present: culpability, knowledge, and
control." Autoliv ASP, 2001 UT App 198 at ¶17; see also Utah
Admin. Code Ann. R994-405-202 (2006). "The employer must
establish each of the three elements . . . for the
[administrative agency] to deny benefits." Gibson v. Department
of Employment Sec., 840 P.2d 780, 783 (Utah Ct. App. 1992).
Because we affirm the ALJ and the Board's finding that Kersten
did not have knowledge that his conduct was inappropriate, we
need not examine the culpability and control prongs of the just
cause inquiry.
¶21 To establish just cause,
[t]he worker must have had knowledge of
the conduct the employer expected. There
does not need to be evidence of a deliberate
intent to harm the employer; however, it must
be shown that the worker should have been
able to anticipate the negative effect of the
conduct. Generally, knowledge may not be
established unless the employer gave a clear
explanation of the expected behavior or had a
written policy, except in the case of a
violation of a universal standard of conduct.
A specific warning is one way to show the
worker had knowledge of the expected conduct.
After a warning the worker should have been
given an opportunity to correct the
objectionable conduct.
Utah Admin. Code Ann. R994-405-202(2) (emphasis added). Thus,
our inquiry focuses on whether EAGALA's board of directors gave
Kersten a clear explanation regarding his use of corporate funds
or whether Kersten violated a universal standard of conduct. See
Autoliv ASP, 2001 UT App 198 at ¶18.
¶22 Kersten asserts that he never knew that his expenditures
were inappropriate because EAGALA did not provide him with any
warnings or written notice. EAGALA responds by contending that
the trustees did not know about the misuse of funds, and even if
Thomas knew about Kersten's expenditures, Thomas was Kersten's
underling and was therefore powerless to do anything about it.
Alternatively, EAGALA contends that Kersten violated a universal
standard of conduct by engaging in self-dealing.
¶23 We disagree with both of EAGALA's contentions. First, it
was "within the realm of reasonableness and rationality," id. at
¶16, for the Board and ALJ to conclude that knowledge was not
established. EAGALA neither warned Kersten to stop his spending
practices2 nor took any other action to block Kersten's use of
his corporate credit card or his access to the company bank
account. The Board and ALJ also concluded that EAGALA did not
take any steps to stop Kersten's monthly withdrawal of $1000 for
rent payments after EAGALA moved its offices out of Kersten's
home. EAGALA repeatedly asserts that Kersten should have sought
permission from the board of trustees before making his
expenditures. This may well have been the more prudent course of
action, but, under the rule quoted above and the specific facts
of this case, it was the employer's duty to provide a clear
explanation of expected conduct. See Utah Admin. Code Ann. R994-
405-202(2). Kersten was a founder of EAGALA and served as
chairman of the board of trustees for six years when he became
president and chief executive officer. The business was
conducted from offices located in the basement of Kersten's home,
company horses were sometimes stabled in Kersten's barn, and
Kersten used his personal equipment to keep the offices
accessible during the winter and for other EAGALA-related
purposes. By the time the structure of the organization changed
in 2006, the lines between personal and business expenditures had
been blurred by practice. EAGALA made no attempt to notify
Kersten that those past practices would no longer be tolerated.
Under the unique circumstances of this case, we cannot say that
the Board's conclusion is outside the bounds of reasonableness
and rationality.
¶24 The Board also reasonably concluded that Kersten did not
violate a universal standard of conduct by engaging in self
dealing because Kersten "gave credible testimony as to why he was
authorized to charge [his] expenses to the corporation." We
likewise do not believe that Kersten's behavior reached a level
where it violated a universal standard of conduct. See, e.g.,
Autoliv ASP, 2001 UT App 198 at ¶27 (concluding that emailing
sexually explicit jokes, pictures, and videos in the workplace
"constitutes a flagrant violation of a universal standard of
behavior"); Bhatia v. Department of Employment Sec. , 834 P.2d
574, 580 (Utah Ct. App. 1992) (concluding that "angrily walking
off the job in the middle of a busy shift at a crucial time for
the employer's business, leaving others to assume . . .
responsibilities, and us[ing] vulgarity within the hearing of
customers" constituted a violation of a universal standard of
behavior). Here, the lines between corporate and personal
activities and expenditures were blurred by historic operations.
Kersten provided office space for the company in his home and
stabled company horses in his barn. Unlike more traditional
commercial enterprises, these practices created confusion about
the appropriate use of corporate funds. Under the facts of this
case, we affirm the Board's determination that Kersten did not
violate a universal standard of conduct.
CONCLUSION
¶25 EAGALA was not prejudiced by the exclusion of the
documentary evidence because EAGALA was free to use the
information contained in those documents at the hearing and
Kersten admitted the expenditures reflected by the documents.
The ALJ and Board's decisions are supported by substantial
evidence. Finally, the ALJ and Board did not exceed the bounds
of reasonableness and rationality in determining that EAGALA did
not have just cause to terminate Kersten.
¶26 We affirm.
______________________________
Carolyn B. McHugh, Judge
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¶27 WE CONCUR:
______________________________
Russell W. Bench,
Presiding Judge
20060340-CA 10
______________________________
William A. Thorne Jr., Judge
notes:
1 EAGALA further contends that it was harmed because it could
not use the documents to impeach Kersten's testimony. We
disagree. For the most part, Kersten admitted to using corporate
funds for the expenses shown in the documents, but he explained
why he believed it was proper to do so. Thus, the documents
would not have shown Kersten to be untruthful. Moreover, and
importantly, the ALJ's ruling did not prevent EAGALA from making
specific reference to the documents or even reading portions of
the documents into the record during its examination of Kersten.
2 At most, the record shows that Thomas told Kersten that his
expenditures blurred the lines between company use and personal
use but did not specify what expenditures in particular were
problematic.