Farmers Co-op. Elevator and Mercantile Ass'n v. Kansas Employment Sec. Bd. of Review, 77,764

• Decision Date: 16 October 1998
• Docket Number: No. 77,764,77,764
• Parties: FARMERS COOPERATIVE ELEVATOR AND MERCANTILE ASSOCIATION, Petitioner/Appellee, v. KANSAS EMPLOYMENT SECURITY BOARD OF REVIEW, Respondent/Appellant, and Larry Rebarchek, Respondent/Appellee.
• Court: Kansas Court of Appeals

Page 699

966 P.2d 699

25 Kan.App.2d 567

FARMERS COOPERATIVE ELEVATOR AND MERCANTILE ASSOCIATION Petitioner/Appellee, v. KANSAS EMPLOYMENT SECURITY BOARD OF REVIEW, Respondent/Appellant and Larry Rebarchek, Respondent/Appellee.

No. 77,764.

Court of Appeals of Kansas.

Oct. 16, 1998.

Review Denied Dec. 22, 1998.

Syllabus by the Court

1. The standard of review of an administrative agency action is stated.

2. The interpretation of a statute is a question of law over which an appellate court exercises unlimited review.

3. It is the function of a court to interpret a statute to give it the effect intended by the legislature.

4. Persons claiming unemployment benefits are entitled to a liberal interpretation of the employment security statutes.

5. Willful and intentional action which is substantially adverse to the employer's interest and constitutes misconduct disqualifying a claimant from unemployment benefits within the meaning of K.S.A. 44-706(b)(1) is action indicating a purpose, intent, or design to do wrong or cause injury to an employer's interest.

6. K.S.A.1997 Supp. 44-714(f) does not prohibit a party from having access to a benefit hearing transcript for use on an appeal from the decision of a referee to the Employment Security Board of Review.

James R. McEntire, of Kansas Department of Human Resources, for appellant.

Ward Loyd, of Ward Loyd Law Offices, L.L.C., of Garden City, for appellee Farmers Cooperative Elevator and Mercantile Association.

Lawrence M. Gurney, of Wilson, Lee & Gurney, of Wichita, for appellee Rebarchek.

Before GERNON, P.J., PADDOCK, S.J., and CHARLES E. WORDEN, District Judge, Assigned.

PADDOCK, J.

This is an unemployment benefits case pursuant to the Kansas employment security law, K.S.A. 44-701 et seq. The Kansas Employment Security Board of Review (Board) appeals the district court's decision denying unemployment benefits to Larry Rebarchek, the former employee of Farmers Cooperative Elevator and Mercantile Association (Farmers). The Board also appeals the decision of the district court that the Board violated K.S.A.1997 Supp. 44-714(f) by refusing to allow Farmers to receive the transcript of the benefit hearing held before the referee.

Facts

Larry Rebarchek began employment with Farmers in 1979 and became the branch manager of Farmers Elevator at Shields, Kansas, in 1986. The Shields elevator is one of five elevators owned by Farmers and consists of six silos for storing wheat, corn, and milo.

As branch manager, Rebarchek was responsible for receiving and loading the grain when purchased and sold, for the maintenance and cleaning of the facility, and for seeing that the grain was turned or moved as necessary to prevent overheating. The overheating of the grain is announced by the development of "hot spots" that are measured by gauges attached to each grain bin. If hot spots develop and the grain is not moved or turned, the grain can overheat rapidly, resulting in a lower quality and a corresponding reduction in value.

Robert Mudd was the other employee at the Shields facility. He had been employed at Farmers' elevators for over 12 years and had worked at the Shields elevator under Rebarchek's supervision during Rebarchek's term as branch manager.

Mudd was considered by both Farmers and Rebarchek to be a dependable employee who could be trusted to perform his job assignments in a proper manner. He fully understood the danger that the development of hot spots held for grain quality. He knew how to read the temperature gauges, knew that the readings were to be recorded, and knew the necessity and the procedure for turning or moving the grain to prevent overheating.

Beginning in January 1994 and extending into 1995, Rebarchek suffered from a back injury which prevented him from performing many of the tasks at the elevator. He was on sick leave for long periods.

During 1994, Rebarchek gave Mudd responsibility for checking for hot spots on a regular basis every week. Rebarchek consulted Mudd as to hot spot activity, and Mudd reported that everything looked fine.

The delegation of authority by a supervisor to an employee occurred within Farmers' organization. Rebarchek's immediate supervisor would delegate company work to other employees and expected those performing the work to follow his directions. Farmers' general manager testified at the hearing before the referee that Rebarchek, during his injury-related absences, had the right to rely on Mudd to handle day-to-day operations at the Shields elevator.

Rebarchek was on sick leave during the time in July 1994 when the grain was scheduled for moving or turning. When he returned to work in July, he noted that Mudd had recorded that the grain had been turned. Rebarchek had no reason to doubt the records and, as far as he knew, the wheat had been turned as reported.

Rebarchek was again absent from work because of his back problem in September 1994, at the time the wheat had been scheduled for turning. Upon his return to work at the end of September or early October, he was informed that the wheat that Mudd had loaded for sale had been graded poor in quality. Rebarchek did everything he could to discover the source of the bad grain, including personally turning the grain and seeing that samples were tested. The tested samples indicated a grade 2 grain, which is the quality that Farmers aims to maintain. Rebarchek reported these results to his supervisor, who was assured that the grain quality was not as bad as had been feared. Thus, at this point, Rebarchek had no reason to doubt that Mudd had completed the turning as recorded.

In November 1994, Rebarchek again injured his back and was absent from work. Grain quality deteriorated in January, and in February 1995, Rebarchek discovered that corn bins that Mudd had told him had been emptied still contained caked corn. Rebarchek also found that Mudd had recorded temperatures in the log without reading the gauges. At this point, Rebarchek first suspected that Mudd was not performing his job. Rebarchek reported to Farmers the problem with the corn and his suspicion concerning poor work performance by Mudd.

Upon discovering the corn was hot, Rebarchek worked overtime to personally turn and cool it. He volunteered to work through the weekend to finish the turning; however, his supervisor told him the bins could wait because he wanted Rebarchek to attend the annual company meeting that weekend. Rebarchek's supervisor expressed no criticism of his management of the elevator at that time.

The Shields elevator was inspected in February and some cleanliness problems had been noted. Rebarchek addressed these problems. A follow-up inspection was made on March 15, 1995, and the facility received average and above average ratings on 10 out of 12 inspection areas. The only below average ratings were due to dust on the floor and on the dryer screens.

The November 1994 back injury had occurred on the job, and Rebarchek had filed a workers compensation claim. On March 21, 1995, Rebarchek received a written reprimand, citing a lack of management as to grain quality, maintenance, and cleanliness of the facility.

Rebarchek was scheduled for back surgery on March 24, 1995. He spent the next 2 days after his reprimand checking grain temperature, seeing to various maintenance and cleaning tasks, and writing detailed instructions for what Mudd needed to do during his absence.

During Rebarchek's absence, the facility was again inspected and graded deficient because of mud on the floor and dust and dirt behind the file cabinets.

Rebarchek returned to work on April 17, 1995. On April 24, 1995, he was discharged. The reasons given him for his discharge were the grain quality problems which resulted in losses to Farmers and the lack of cleanliness of the facility. Rebarchek's supervisor testified that he had decided to discharge Rebarchek after unfavorable corn grades started showing up in April.

Following his discharge, Rebarchek filed for unemployment benefits. Farmers contested his claim. The examiner initially in charge of considering the claim found that Rebarchek had been discharged for misconduct as defined by K.S.A. 44-706(b). Rebarchek appealed to the referee who, after a full hearing, made detailed findings and concluded that Rebarchek was not guilty of misconduct within the meaning of K.S.A. 44-706(b)(1). The referee granted Rebarchek's claim.

Farmers appealed the referee's decision to the Board. The Board adopted the referee's findings and affirmed the referee's decision. Farmers appealed to the district court. The district court reversed the benefits decision of the Board, and in addition, held the Board erred in refusing to allow Farmers to have a copy of the transcript of the hearing before the referee for use in the appeal. The Board appealed.

The benefits issue

Review of a final Board order under the Employment Security Act is controlled by K.S.A.1997 Supp. 44-709(i) of the Kansas Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq. Under K.S.A. 77-621(c), the district court can grant relief under certain limited circumstances. Among those circumstances are instances where the agency has erroneously interpreted or applied the law; where the agency has engaged in an unlawful procedure or has failed to follow prescribed procedures; or where the agency action

"is based on a determination of fact, made or implied by the agency, that is not supported by evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act";

or when the agency's action is otherwise "unreasonable, arbitrary or capricious." K.S.A. 77-621(c)(4), (5), (7), (8).

We review the agency's decision in the same manner as the district court, reviewing the whole record and determining whether there is substantial evidence to...