Wisconsin Supreme Court Draws The Line On “Substantial Fault” For Unemployment Benefits

On May 4, 2017, the Wisconsin Supreme Court held in Operton v. LIRC that Lela Operton was entitled to unemployment benefits after being fired by a Madison area Walgreens.  The Court upheld the Court of Appeals which had ruled that the Labor and Industry Review Commission (“LIRC”) was incorrect to deny Operton unemployment benefits when it found that several cash-handling errors constituted substantial fault and warranted a denial of unemployment benefits.

During her twenty-one months of employment, Operton made eight cash-handling errors, which included: accepting a Women, Infants, and Children (“WIC”) check for $8.78 when the check should have been for $5.78; accepting a WIC check for $27.63 before the date on which it was valid; and allowing a customer to use a credit card to purchase $399.27 worth of items, but did not check the customer’s identification in violation of Walgreens’ policy and the credit card turned out to be stolen.  As a result, Walgreens terminated Operton’s employment due to these multiple cash-handling errors and her inability to improve despite receiving warnings.

Operton filed for unemployment and Walgreens contested her request claiming that she was terminated due to an inability to perform her job.  LIRC eventually determined that Operton was ineligible for unemployment benefits because she was terminated for “substantial fault.”

Pursuant to Wisconsin law, an employee who has not committed misconduct may still be ineligible for unemployment compensation if they were discharged for “substantial fault.”  Wis. Stat. § 108.04(5g)(a).  “Substantial fault” is defined broadly including “acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the employee’s employer.”  Id.  However, the legislature provided three types of conduct that was explicitly exempted from the definition of substantial fault, including: “One or more inadvertent errors made by the employee.”  Id.

The burden is on the employer to show that the termination was due to the substantial fault of the employee.  The Court carefully reviewed each and every cash-handling error made by Operton and found that none were intentional or willfully disregarded the employer’s interests.  The Court noted that the errors were not so egregious as to warrant the conclusion that the errors were transformed from inadvertent to reckless or intentional, especially considering that the errors occurred over a twenty-one month time period when Operton had completed approximately 80,000 cash-handling transactions.  The Court held that the eight accidental or careless errors were, as a matter of law, “inadvertent errors.”  Specifically, the length of her employment, the number of transactions she handled, and the variety of errors she committed compelled the conclusions that she was not terminated from Walgreens for substantial fault.  The Court remanded the matter to LIRC to determine the amount of unemployment compensation Operton was owed.

This ruling is important because it narrows LIRC’s previously expansive definition of what constituted “substantial fault” under the law.  When considering whether to contest a former employee’s application for unemployment benefits, it is important for employers to consider the exact factual circumstances surrounding that employee’s termination of employment.  Based on the Court’s decision, it seems more likely that employees engaging in serious, willful misconduct, or those making repetitive mistakes of an identical nature despite repeated warnings, will truly be ineligible for unemployment benefits.  In contrast, a pattern of seemingly unintended mistakes amongst a mass of otherwise properly performed duties, even if they appear to be careless, are likely to be viewed as “inadvertent errors” preserving the employee’s right to unemployment benefits.

If you have any questions about this article, please contact an attorney at Mallery & Zimmerman.