Many employers believe that it is difficult to disqualify an employee for unemployment benefits when the reason for termination is poor performance, such as refusal to perform assigned duties. Unfortunately, a recent decision by the District of Columbia Court of Appeals only reinforces this belief, and will make it more difficult for employers in the District, and perhaps elsewhere, to contest successfully unemployment claims based on an employee's alleged gross misconduct. Odeniran v. Hanley Wood, LLC, C.A. No. 08-AA-634 (DC Dec. 17, 2009).

Background
Under the District of Columbia’s unemployment compensation law, any individual who has been discharged for “gross misconduct” is not eligible for benefits until he or she has been employed in each of 10 successive weeks (whether or not consecutive) and has earned wages from employment equal to not less than 10 times the weekly unemployment benefit amount.

In contrast, any individual who is discharged for misconduct, other than gross misconduct, is not eligible for benefits for the first eight weeks otherwise payable to the individual or until the individual has been employed in each of eight subsequent weeks (whether or not consecutive) and has earned wages from employment equal to not less than eight times the weekly unemployment benefit amount.

Relevant Facts
According to the court’s opinion, Henry Odeniran worked at Hanley Wood, a real estate market research firm, from June 11, 2007 until March 17, 2008. Guy Sheetz, a Regional Manager at Hanley Wood, “clearly explained” to Odeniran when the latter was interviewing for a job that the company expected a consulting position to “open up” in the near future. Based on Sheetz's statements, and expecting to receive a promotion to a consulting position within a few months, Odeniran took a pay cut from the job that he held at the time and joined Hanley Wood as a Research Associate.

Odeniran came to have an unhappy experience at Hanley Wood. To begin with, as the Administrative Law Judge (ALJ) hearing the underlying case found, “because of the downturn in the real estate market, [Hanley Wood] disbanded its consulting business, so a promotion to [a consulting position] was no longer an option” for Odeniran. Odeniran also felt that his responsibilities as a Research Associate increased several times without a corresponding raise in pay. Moreover, Odeniran believed that Hanley Wood's parking reimbursement policy failed adequately to take into account the travel expenses that he incurred as part of his duties. To ameliorate the parking costs, Odeniran asked that he be permitted to work from home.

On Wednesday, March 12, 2008, Odeniran approached Sheetz with what Sheetz termed an “ultimatum” — as the ALJ found, Odeniran told Sheetz that he (i.e., Odeniran) “needed to make more money and be able to work from home, or he would have to find another job.” Sheetz responded that a pay raise for Odeniran was not in the cards “due to market conditions.” Furthermore, although Hanley Wood permitted some employees to work from home, Sheetz felt that Odeniran's performance at Hanley Wood did not merit the telecommuting privilege.

On Friday, March 14, 2008, two days after Sheetz rejected Odeniran's “ultimatum,” Odeniran told Sheetz via e-mail that he was taking a sick day. Sheetz testified that he “responded right away,” telling Odeniran about two deadlines that Odeniran had that day. Odeniran, according to Sheetz, never replied to Sheetz's e-mail and missed both deadlines. Odeniran was fired the following Monday, March 17, with the events leading up to his termination evolving as the day went on.

At approximately 11:00 am that Monday — two hours after Odeniran had arrived at work — Sheetz brought Odeniran “in” (presumably to his office) to “see if he was all right [ sic ].” Sheetz testified that it “appeared that, you know, walking by his office, [Odeniran] wasn't making phone calls, he wasn't doing any kind of work related to Hanley Wood.” Sheetz, therefore, “advised [Odeniran that Sheetz] had been by his desk a couple times and [Odeniran] said he had a busy schedule.” Sheetz also told Odeniran that Sheetz “needed him to concentrate on the work that we had to do, already behind because of Friday and we had some work to do.”

Sheetz believed that Odeniran failed to do any work as the day went on. Thus, one half-hour after their initial conversation, Sheetz saw that Odeniran “was still on the Internet” and not performing his assigned tasks. By 3:00 pm, Sheetz believed that Odeniran still “clearly” had done “no work.” Sheetz asked Odeniran several times what he was working on; Odeniran responded that he was “busy with other stuff,” but refused to provide details, which caused Sheetz to believe that Odeniran was lying.

Concerned about Odeniran's apparent failure to do his job, Sheetz contacted Margaret Connery, the Human Resources Director for Hanley Wood. Connery, who works out of a different office, telephoned Odeniran to ask what he had been working on, whether he would be reporting his time as “work hours,” and whether he was working on a company computer. Odeniran told Connery that he preferred not to answer these questions. At the hearing on Odeniran's eligibility for unemployment compensation benefits, Odeniran testified that he “did not want to have that conversation with her in front of the other research associates because [he] felt that [Connery's questions related to] private business that should have been talked about in another, in another environment, in another more private room.” It was not clear from the hearing transcript whether Odeniran explained this concern to Connery when they spoke.

Odeniran was fired at the end of the day. According to Sheetz, Odeniran's March 12 “ultimatum” and the deadlines that Odeniran missed on March 14th, when he took a sick day, were “problem[s]” for Hanley Wood. The ALJ found, however, that Hanley Wood ultimately fired Odeniran not for the ultimatum or the missed deadlines, but rather due to Odeniran's “fail[ure] to perform his duties on March 17, 2008.”

The ALJ’s Decision
The ALJ credited Hanley Wood's “version of the material facts.” The ALJ noted that whereas Hanley Wood's witnesses gave “detailed and consistent testimony” regarding the events of the 17th, Odeniran provided only “vague and incomplete responses to that testimony.” Moreover, the ALJ thought that Odeniran's “disproportionate[ ]” focus at the hearing “on the several bases for his disgruntlement with [Hanley Wood], rather than on the question of whether he was performing his duties diligently on March 17, 2008” indicated that Odeniran in fact was not working on the day he was fired. Ultimately, the ALJ held that Odeniran was fired for gross misconduct, and thus was ineligible to receive unemployment compensation benefits at the time of his termination.

The Appeal
Odeniran appealed the ALJ’s decision on a pro se basis. Hanley Wood did not enter an appearance in, or file a brief with respect to, the appeal. According to the DC Court of Appeals, “[a] terminated employee who satisfies the basic requirements of the unemployment compensation statutes is presumed to be eligible for benefits. That presumption is rebutted, and the employee becomes ineligible for benefits, when the employer proves by a preponderance of the evidence that the employee was fired for misconduct.” The District of Columbia distinguishes between “gross misconduct” and “misconduct, other than gross misconduct,” which the court has referred to as “simple misconduct.” As discussed above, being discharged for gross misconduct has a different impact on unemployment benefits than being discharged for simple misconduct.

An employer seeking to prevent the payment of unemployment compensation bears the burden of proving that the employee engaged in misconduct (gross or otherwise). A finding of misconduct must be based fundamentally on the reasons specified by the employer for the discharge.

Gross misconduct is defined by regulation as “an act which deliberately or willfully violates the employer's rules, deliberately or willfully threatens or violates the employer's interests, shows a repeated disregard for the employee's obligation to the employer, or disregards standards of behavior which an employer has a right to expect of its employee.” Acts that “may” constitute gross misconduct include: “a. Sabotage; b. Unprovoked assault or threats; c. Arson; d. Theft or attempted theft; e. Dishonesty; f. Insubordination; g. Repeated disregard of reasonable orders; h. Intoxication, the use of or impairment by an alcoholic beverage, controlled substance, or other intoxicant; i. Use or possession of a controlled substance; j. Willful destruction of property; k. Repeated absence or tardiness following warning.”

Simple misconduct encompasses “those acts where the severity, degree, or other mitigating circumstances do not support a finding of gross misconduct.” Simple misconduct refers to “an act or omission by an employee which constitutes a breach of the employee's duties or obligations to the employer, a breach of the employment agreement or contract, or which adversely affects a material employer interest.” Simple misconduct “may include, but is not limited, to the following: a. Minor violations of employer rules; b. Conducting unauthorized personal activities during business hours; c. Absence or tardiness where the number of instances or their proximity in time does not rise to the level of gross misconduct; d. Inappropriate use of profane or abusive language.”

The court found that the ALJ's factual findings were well supported in the record, so it did not disturb them. Thus, it accepted the ALJ's determination that on the day that he was fired, Odeniran “was not performing his assigned duties,” that Odeniran acted intentionally, and that Odeniran failed to do his work even though Sheetz had spoken to him several times to express his “concern.” The court held, however, that the ALJ committed legal error in holding that these facts established that Odeniran engaged in “gross misconduct.”

First, the court felt the ALJ's application of the definition of gross misconduct in the regulation “proves too much.” “That regulation, to be sure, is necessarily functional and flexible, but context makes clear that it should not be read to ‘extend to the outer limits of its definitional possibilities.’” The court reasoned this was evident from the fact that the regulation gives as examples of gross misconduct “sabotage,” “arson,” and “threats” — “misdeeds that are far more egregious than every act that literally might be viewed as being encompassed within the definition of gross misconduct in [the regulation].” Thus, even though the list of examples in the regulation is illustrative, not exhaustive, “it is difficult to read that list as doing anything other than recognizing that the types of conduct that constitute gross misconduct are narrower than what might come within a literal definition of that phrase.”

The court observed that the following examples illustrated the point:

For instance, consider an employee who, despite knowing that his employer recycles paper and aluminum, throws an old newspaper and a soda can into the trash bin. Or imagine an employee who takes an unauthorized cigarette break. What about an employee who spends 15 minutes at work shopping online for personal purposes or takes a pen home from work? In some sense, of course, it is fair to say that such employees “deliberately or willfully threaten[ ] or violate[ ] the employer's interests [or] disregard [ ] standards of behavior which an employer has a right to expect of its employee.” But because [the regulation] clarifies, through examples, that to constitute gross misconduct, an employee's misdeeds must be serious indeed, it would be absurd to view such commonplace actions as disqualifying an otherwise eligible employee from receiving unemployment compensation benefits. Therefore, the ALJ was wrong to hold that Odeniran was guilty of gross misconduct simply because one could say, without doing violence to the English language, that the literal definition of gross misconduct given in [the regulation] describes the conduct for which Hanley Wood fired Odeniran. . . . (citations omitted)

According to the court, “Odeniran did more than just take a pencil home — in fact, as the ALJ found, on the day that he was fired, Odeniran purposely failed to do his job during the course of the entire day despite getting talkings-to from Sheetz and Connery.” Nonetheless, the court held that Odeniran's actions did not constitute gross misconduct within the meaning of the unemployment benefits statute.

Several principles guided the court’s analysis. First:

The concept of people being terminated for poor work performance must have been familiar to the drafters of the unemployment benefits statute and regulations; this is not a case where the exclusion of an item from a list can be attributed to the drafters' understandable failure to anticipate (or reluctance to list) every far-flung hypothetical that could arise under a legal regime. Therefore, it is a fair surmise that the drafters of the regulations deliberately excluded intentional failure to work from the list of examples in [the regulation], and did not view such conduct as per se amounting to gross misconduct.

Second, the court gave effect to the distinction that the regulations make between gross and simple misconduct. “In this case, if viewed in a vacuum, the definitions of gross misconduct and simple misconduct both could be read to cover an intentional failure to work. But the drafters of the unemployment statute could not have intended that outcome because it would eviscerate the distinction between gross and simple misconduct.”

Third, beyond the language of the regulations, the court held that its prior decisions also reject the view that Odeniran's actions on the day of his firing constituted gross misconduct. “It is true that we have stated that ‘unsatisfactory work performance may amount’ to gross misconduct ‘in some instances,’ provided that the employee acted ‘intentionally.’” However, the court held that “the requirement that the dismissed employee acted intentionally is only a necessary, not a sufficient, condition for a finding of gross misconduct.” Thus, even though prior cases held open the possibility that the employees in those cases were fired for gross misconduct for willful poor performance, “those cases involved situations where the employer demonstrated that the misconduct was ongoing or had potential for grave consequences.” According to the court, “Hanley Wood, which bore the burden of proof, did not present evidence that Odeniran's willful non-performance on March 17th was other than an isolated incident, nor did it contend that its business had suffered serious consequences as a result.”

Finally, the court held that the ALJ's alternate ground for decision-that Odeniran repeatedly disregarded reasonable orders from his employer — also failed. According to the court, “[e]ven assuming that the disregard of reasonable orders principle should be applied broadly, the ALJ's conclusion is insufficient for the simple reason that the ALJ did not cite, and the record does not reveal, that Odeniran repeatedly disobeyed any orders.” The court reasoned that “[t]he only thing that comes close to an ‘order’ given to Odeniran was Sheetz's claim that at around 11:00 am he told Odeniran that Sheetz ‘needed him to concentrate on the work that we had to do.’” The court thus held that “there is not substantial evidence in the record that Odeniran violated “repeated orders.”

Although the facts in the record were found insufficient to sustain the ALJ's conclusion that Odeniran was fired for gross misconduct, the court found that “the record does make clear — and we hold — that Odeniran was terminated for simple misconduct.” Simple misconduct, as mentioned above, refers to “an act or omission by an employee which constitutes a breach of the employee's duties or obligations to the employer ... or which adversely affects a material employer interest.” Furthermore, the regulation explicitly states that “[c]onducting unauthorized personal activities during business hours” may constitute simple misconduct.

Conclusion
The Odeniran case makes it abundantly clear that employers in the District of Columbia and elsewhere face a heavy burden in contesting unemployment claims based on gross misconduct by employees terminated for poor performance and/or refusal to perform assigned duties. Decisions to contest unemployment claims, and how far to contest them, can be very important, particularly if there is a likelihood of litigation over the termination decision under employment discrimination, harassment and retaliation laws and other causes of action. These decisions should be discussed with your counsel before they are made, because they can have serious implications going forward.

Michael L. Stevens
stevens.michael@arentfox.com
202.857.6382