Freeland v. Employment Appeal Bd., 91-616

• Decision Date: 21 October 1992
• Docket Number: No. 91-616,91-616
• Citation: 492 N.W.2d 193
• Parties: Shirley FREELAND, Appellant, v. EMPLOYMENT APPEAL BOARD and Hawkeye Institute of Technology, Appellees.
• Court: Iowa Supreme Court

Page 193

492 N.W.2d 193

Shirley FREELAND, Appellant, v. EMPLOYMENT APPEAL BOARD and Hawkeye Institute of Technology, Appellees.

No. 91-616.

Supreme Court of Iowa.

Oct. 21, 1992.

C.A. Frerichs and Thomas P. Frerichs, Waterloo, for appellant.

William C. Whitten, Des Moines, for appellee Employment Appeal Bd.

Jaki K. Samuelson of Whitfield, Musgrave & Eddy, Des Moines, for appellee Hawkeye Institute of Technology.

Considered en banc.

ANDREASEN, Justice.

As a result of agency action, Shirley Freeland was denied unemployment benefits. She petitioned the district court for judicial review. The court found Freeland had been afforded procedural due process in the administrative proceedings and that her misconduct had been sufficiently established. The court entered judgment affirming the agency action. On appeal, the court of appeals reversed. We granted further review and now vacate the decision of the court of appeals and affirm the district court.

I. Background.

Freeland was employed as a secretary by Hawkeye Institute of Technology (Hawkeye Tech). In January 1990 she worked for Dr. Glen Pedersen, Vice President of Vocational Technical Education Division. At Pedersen's request, she collected money from coworkers and ordered flowers from Design Studios for two Hawkeye Tech employees who had been hospitalized. In February 1990, the florist mailed a statement for the flowers to Freeland at the Hawkeye Tech office address. The flower bill was not paid. The florist mailed a statement each month thereafter to Freeland in care of Hawkeye Tech. After three or four months the florist called Freeland at work and inquired about payment. Freeland said she would take care of it but no payment was made.

On June 18, 1990, Dr. John Hawse, president of Hawkeye Tech, was told by his secretary that Hawkeye Tech had a flower bill that had not been paid. He called Design Studios and talked to the owner Joan Kerns. Kerns told him two flower arrangements had been ordered by Freeland to be billed to Hawkeye Tech, attention to her. Hawse then requested Pedersen and Ron Kuhlman, director of personnel, to investigate the matter.

Pedersen asked Freeland to come to his office. When asked about the flower fund money Freeland admitted she had used the money to purchase prescription drugs for her husband. Pedersen suggested he considered the conversion of money entrusted to her as theft. When faced with the possibility of theft charges, termination of her employment, or resignation, Freeland submitted her written resignation.

The following day Freeland, by letter, advised Pedersen that she was withdrawing her resignation. The letter was referred to the president. Hawse notified Freeland that the resignation had been accepted and her request to withdraw would not be honored. Freeland then filed her claim for unemployment insurance benefits with Job Service.

The Job Service claims representative found Freeland had been compelled to resign when given the choice of resigning or being discharged. Under these circumstances, her resignation would not be considered a voluntary leaving. No disqualification was imposed; Freeland's claim for unemployment compensation was allowed.

Hawkeye Tech appealed from this initial determination. Following a contested case hearing, an administrative law judge (ALJ) found Freeland's acts and omissions constituted misconduct justifying denial of unemployment benefits.

On appeal, the Employment Appeal Board affirmed the decision of the ALJ. The decision, with its findings of fact and conclusions of law, were incorporated into the agency's decision. Freeland's application for rehearing was denied by the agency.

Freeland then filed a petition for judicial review in district court. Following the district court's judgment, which affirmed the agency action, Freeland appealed. We transferred the case to the court of appeals.

The court of appeals reversed, finding the agency's determination of misconduct was not supported by substantial evidence. The agency and employer sought, and we granted, further review.

There are two primary issues raised on appeal. First, was Freeland given sufficient notice that her misconduct was an issue in the contested case hearing before the ALJ. Second, was there substantial evidence to support the agency's finding of misconduct.

II. Notice.

Freeland claims it was a denial of due process for the ALJ to inject the issue of "disqualifying misconduct" into the hearing without prior notice. When constitutional issues are raised in a judicial review proceeding, we make an independent evaluation of the totality of the evidence; our review is de novo. Consumer Advocate v. Commerce Comm'n, 465 N.W.2d 280, 281 (Iowa 1991).

Parties to an administrative hearing are entitled to notice and the opportunity to defend. Carr v. Iowa Employment Sec. Comm'n, 256 N.W.2d 211, 214 (Iowa 1977). The hearing before the ALJ must be conducted pursuant to the provisions of Iowa Code chapter 17A relating to hearings for contested cases. Iowa Code § 96.6 (1989). In such contested cases, all parties shall be afforded an opportunity for hearing after reasonable notice in writing. Iowa Code § 17A.12. The notice must include a reference to the particular sections of the statutes and rules involved and a short and plain statement of the matters asserted. Iowa Code § 17A.12(2)(c) and (d).

Here, Job Service gave notice to the parties that Hawkeye Tech had appealed the action taken by Job Service. The notice identified the involved statutes as sections 96.5(1) and 96.5(2)(a). The notice also stated: "The following matters have been asserted ... 1. WHETHER THE CLMT. WAS COMPELLED TO RESIGN BY THE EMPLOYER." The notice advised the parties that the hearing would be conducted by an ALJ and that the purpose of the hearing is to receive evidence from the parties to enable the ALJ to determine if the action taken by Job Service was correct. Both Freeland and Hawkeye Tech were represented by legal counsel at the hearing.

Prior to receiving evidence the ALJ stated:

As I make my decision in this case I'll be concerned with the provisions of Iowa Code section 96.5-1 and subsection 2-A. The important language in subsection 1 is that an individual shall be disqualified for benefits if the individual has left work voluntarily without good cause attributable to the individual's employer; while in subsection 2-A the pertinent language is that an individual shall be disqualified for benefits if the individual has been discharged for misconduct in connection with the individual's employment.

The employer called Kerns, Pedersen, Hawse, and Kuhlman as witnesses. Freeland testified on her own behalf. Evidence relating to Freeland's misconduct was received. After all evidence had been taken, Freeland's counsel raised, for the first time, that his client would be denied due process of law if the ALJ considered any issue other than whether there was a voluntary quit.

The due process issue was addressed by the ALJ. In his decision it is stated:

He [Freeland's attorney] argued that the narrative of the matter asserted on the hearing notice listed only the issue of whether the claimant was compelled to resign. This argument fails to take into account the fact that both the law section concerned with quits and that concerned with discharges was listed on the notice. Furthermore, Iowa Administrative Code section 345-6.2(5)(d) ¹ states in pertinent part: "An issue stated in terms of a voluntary leaving or discharge shall be construed generally to be a single issue concerning the separation from employment so that evidence on either both kinds of separation may be received." Considering these factors and considering that the claimant has been represented by licensed attorney since at least the latter part of July 1990, the denial of due process argument is rejected.

The agency denied Freeland's application for rehearing that again raised the due process issue. On judicial review, the district court found Freeland was adequately advised of the claimed misconduct and was able to, and in fact did, defend against that claim at the time of the hearing before the ALJ. Upon our de novo review we reach the same conclusion.

III. Misconduct.

Iowa law disqualifies employees from receiving unemployment compensation for various reasons. See Iowa Code § 96.5. Misconduct is specifically listed as a cause for disqualification. Iowa Code § 96.5(2).

The term misconduct is not defined in the statute. However, misconduct is defined by agency rules. It is defined, in part, as a deliberate violation or disregard of standards of behavior that the employer has the right to expect of employees. 345 Iowa Admin.Code 4.32(1)(a). We have held the agency rule definition is an accurate reflection of legislative intent. See, e.g., Kleidosty v. Employment Appeal Bd., 482 N.W.2d 416, 416-17 (Iowa 1992); Larson v. Iowa Dep't of Job Serv., 474 N.W.2d 570, 571-72 (Iowa 1991).

Our review is on error, and the agency's decision is binding on us if it is supported by substantial evidence and not based upon incorrect conclusions of law. Iowa Code § 17A.19(8)(e), (f); Larson, 474 N.W.2d at 572. Evidence is substantial when a reasonable mind could accept it as adequate to reach the same findings. Sallis v. Employment Appeal Bd., 437 N.W.2d 895, 896 (Iowa 1989). We look only to the final agency decision and determine whether the record supports the agency's ruling. Aluminum Co. v. Employment Appeal Bd., 449 N.W.2d 391, 394 (Iowa 1989). In reviewing a district court decision on the validity of agency action, we decide whether the district court has correctly applied the law. The district court itself acts in an appellate capacity to correct errors of law on the part of...